Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

NEW WRIT

For Glasgow, Queen's Park, in the room of Frank McElhone, Esq., deceased.—[Mr. Michael Cocks.]

AUTUMN STATEMENT 1982

Return ordered,
of Mr. Chancellor of the Exchequer's Autumn Statement 1982."—[Mr. Garel-Jones.]

Oral Answers to Questions —

Mr. Speaker: At the beginning of the new Session, I appeal to the House for brief supplementary questions. It is unfair if an hon. Member asks more than one supplementary question at a time.

Mr. Cryer: Mine are all very short.

Mr. Speaker: Order. Yes, I know that the hon. Member for Keighley (Mr. Cryer) is very good at something.

Oral Answers to Questions — TRADE

United States of America (Sanctions)

Mr. Dewar: asked the Minister for Trade if he will make a statement on Her Majesty's Government's policy on sanctions being imposed on British companies by the United States of America.

The Minister for Trade (Mr. Peter Rees): Her Majesty's Government regard the recent measures taken by the United States Government against British companies supplying goods for the Siberian gas pipeline as unacceptable. The measures, in our view, constitute an attempt to interfere with pre-existing contracts and to extend United States extraterritorial jurisdiction. It remains Her Majesty's Government's policy to defend our national interest in such cases, while seeking an early solution to our differences with the United States Government along with other European countries affected.

Mr. Dewar: Does the Minister accept that those who work in the firms that are threatened have a real reason for being irritated when they see their jobs put under stress in this way, and at the same time read of the increased grain trade between the United States and the Soviet Union? Will the hon. and learned Gentleman put the greatest possible pressure on the United States Government to try to moderate their policy in this respect, and also give a guarantee that if, unfortunately, firms such as John Brown and a number of others in Britain suffer as a result of that policy, they will be financially compensated by the British Government?

Mr. Rees: Certainly in our representations to the United States we have pointed out that while we understand their wish to be tender to the excess production of their Mid-Western farmers, they should also be sensitive to the interests of those who work in our great exporting companies and who are likely to be affected by their sanctions.

Mr. Beaumont-Dark: That answer is very welcome to the House. But could not the United States be told that if they were to stop selling grain, we might well consider not selling industrial goods?

Mr. Rees: I am not certain whether that is an entirely acceptable trade-off, but the connection between the two operations has been clearly perceived on this side of the Atlantic at any rate.

Mr. John Smith: As it is widely rumoured that a settlement of this dispute is in the offing, will the Minister make it clear that in future contracts the British Government will not agree to American monitoring and the American veto of British commercial initiatives?

Mr. Rees: It would not be Her Majesty's Government's policy to allow the Government of any foreign power, however friendly, to have an ultimate veto over our trading relationships.

Exports

Mr. Eggar: asked the Minister for Trade whether he is satisfied with the current level of exports.

Mr. Peter Rees: The level of exports has been volatile during 1982—a sharp rise in September following a low level in August. It is encouraging, however, that the level of exports in 1982 has been maintained at that of 1981, despite difficult world trading conditions.

Mr. Eggar: Will my hon. and learned Friend confirm that United Kingdom exporters and the United Kingdom as a whole will benefit from minimum interference with trade?

Mr. Rees: I certainly confirm that. It is the Government's firm intention to do all that they can to maintain the open trading system which has benefited this country and exporters over many years.

Mr. Brocklebank-Fowler: What will be the likely effect on British exports to Nigeria in view of that country's decision to issue no new letters of credit to finance imports?

Mr. Rees: In the short term it is bound to be disadvantageous, but I stress to the House that the Nigerian market is important. It has had its ups and downs, but I hope that it will soon move into a more satisfactory phase, thereby benefiting British exporters.

Mr. Sims: In view of recent speculation, is my hon. and learned Friend aware that his commitment, on behalf of the Government, to open trading will be very welcome to Conservative Members? It must surely be better for us to encourage our overseas trading partners to follow a similar policy than to erect restrictions. In particular, will my hon. and learned Friend press upon the Japanese Government the fact that at the moment it is difficult for British insurance companies to practise there?

Mr. Rees: I am glad to hear my hon. Friend's observations on the benefits of the open trading system.


We shall stress that position at the GATT ministerial meeting in November. However, there are some markets which, I regret to say, are not as accessible to our exporters as our markets are to theirs. We shall continue to hammer that point home, particularly in regard to Japanese markets, in all exchanges with the Japanese Government and the Keidenren.

Mr. Woolmer: The Minister's confidence in our export position is not shared by the CBI, is it? Is the hon. and learned Gentleman aware that its latest economic report shows that 34 per cent. of the companies surveyed were less optimistic about export prospects, that 42 per cent. reported a fall in orders, that 60 per cent. said that export order books are below normal, and that 69 per cent. said that export price competitiveness is the worst since records began? When will the Government admit that their policies are failing industry, British workers and the nation?

Mr. Rees: The hon. Gentleman has been looking at the wrong statistics. The House should bear in mind that in the first nine months of 1982 there was a current account surplus of £2½ billion. That puts a slightly different complexion on the matter.

Insolvency (Cork Committee)

Mr. Ginsburg: asked the Minister for Trade when he expects to reach a conclusion on the recommendations of the Cork committee on insolvency.

Mr. Timothy Smith: asked the Minister for Trade what representations he has received in response to his invitation for comments on the Cork report.

The Minister for Consumer Affairs (Dr. Gerard Vaughan): The Government accept the general principles underlying the Cork report. We are still waiting for some of the consultation comments to come in. As soon as we have those, I hope to announce whether there are steps that we can take to deal with abuses in advance of the major legislation which would be required to implement the main body of the report.

Mr. Ginsburg: I welcome the Minister's reply, but is he aware that there is considerable disappointment that he has not made a definite commitment at least to incorporate legislation on the appointment of administrators so that in the current climate companies threatened with insolvency can be kept going and the workers employed?

Dr. Vaughan: I make it clear to the House that I am concerned, as is any hon. Member, to stop the abuses of the insolvency laws that are undoubtedly taking place. I am keen to take some action soon, and for that reason I had a meeting with Sir Kenneth Cork only last week.

Mr. Smith: To which of the Cork committee's recommendations does my hon. Friend attach the greatest priority? Has he referred any of the recommendations to the advisory panel on company law?

Dr. Vaughan: I am considering what parts can be pulled out from the Cork package. It is an integrated package. I do not wish to make the mistake of pulling out some parts and creating difficulties in others. I have not yet taken any advice on that matter.

Mr. Clinton Davis: While the Minister, in effect, prevaricates about the Cork report, will he at least bury one

point which emerged from the Government's Green Paper on insolvency law and practice, namely, the proposal to emasculate the official receiver service? Is that now dead?

Dr. Vaughan: That aspect of the Cork report will require careful consideration. I cannot give the hon. Gentleman an answer at the moment.

Mr. Bowen Wells: Is my hon. Friend aware of the great impatience among the public in general and consumers in particular over the continuous dragging of feet on this issue both by the Labour Government and this Government? Will he give me an assurance that he will introduce legislation during this parliamentary Session?

Dr. Vaughan: I do not accept that the Government are dragging their feet. I am well aware of the need to protect consumers as much as possible. I shall come back to the House with proposals as soon as possible.

Mr. John Fraser: Does the Minister realise that the insolvency laws have been recognised to be unsatisfactory for at least a decade and that legislation is now long overdue? The present law is particularly hard on consumers, suppliers and unsecured creditors. If the Government cannot bring forward such legislation in this Session, will the hon. Gentleman publish detailed legislative proposals so that the next Labour Government can do something about the situation?

Dr. Vaughan: When the hon. Gentleman sees our proposals he will have to accept that the Government are mindful of the urgency of this matter. I suggest that he waits until we produce some recommendations.

Mr. Squire: May I encourage my hon. Friend by assuring him that if he wished for a short, sharp measure to protect consumers, I have a strange feeling that it would pass through the House more rapidly than other legislation that might be contemplated?

Dr. Vaughan: I am grateful to my hon. Friend for that advice.

British Airways

Mr. Robert Atkins: asked the Minister for Trade what further discussions he has had with the chairman of British Airways concerning the injection of private capital into the company.

The Under-Secretary of State for Trade (Mr. Ian Sproat): I am in regular touch with the chairman of British Airways about its sale to the private sector.

Mr. Atkins: Is my hon. Friend aware that I and many Conservative Members share his determined commitment to privatise British Airways as soon as is practical? Nevertheless, some Conservative Members are concerned to ensure that those free enterprise airlines which have kept their houses in order during a difficult time should not suffer or be placed at a disadvantage by the effects of such privatisation as he and we think necessary.

Mr. Sproat: I share my hon. Friend's desire that the private sector should be put at no competitive disadvantage by our action with regard to British Airways. Therefore, I have decided that, over the coming weeks and months, I shall give every opportunity to the managements of the private sector airlines to tell me what they feel about the matter so that we can take their views into full account.

Mr. McNally: As the Minister has released the taxpayer from the burden of operating Concorde, will he make it clear to the chairman and any would-be investors that public assets associated with Concorde's operation will be transferred to British Airways on a strictly commercial basis?

Mr. Sproat: The financing of Concorde is a matter for my hon. Friend the Minister of State, Department of Industry. He will shortly be making a statement on that matter and the hon. Gentleman can then put his question to him.

Mr. Foulkes: Does the Minister realise that he and his place man, Sir John King, are causing grave damage to British Airways by massaging the accounts and pushing the airline towards privatisation against the advice of all the professionals in the airline industry? Will he desist from that practice and stop trying to add another scalp to his belt in time for the general election?

Mr. Sproat: It would be hard to state the opposite of the truth with more exactitude. If the hon. Gentleman will wait until British Airways publish their accounts for the first six months of this financial year, he will see that they are in true profit of about £100 million after the payment of taxation and the repayment of debt interest. That is an almost miraculous turn round, and I look for the Opposition's unqualified approval of that splendid achievement.

Mr. McCrindle: Will my hon. Friend confirm that any restructuring of the capital base of British Airways which the Government may have in mind would require legislation from the House? Are we to draw any conclusion from the absence of any such reference in the Queen's Speech?

Mr. Sproat: No, I would not draw any conclusions from what the Queen's Speech does not say on this matter. The House has already given us the approval that we need to turn British Airways into a private limited company. We are currently considering the capital reconstruction proposals which British Airways have put to us.

Mr. John Smith: Will the Minister tell us what public interest would benefit by the writing off of about £700 million of British Airways' liabilities prior to selling the assets on the private market? Is that not a total loss for the taxpayer and a gain only for the speculators and investors?

Mr. Sproat: We have not mentioned any actual figures. We are merely considering the proposals for capital reconstruction which British Airways have put to us.
I am certain that privatisation—when it comes, as come it will—will prove to be of the greatest benefit not only to British Airways but to British Airways staff—who will have a good, prosperous industry which gives them job security—to the consumer and the taxpayer.

European Community (Balance of Trade)

Mr. Leighton: asked the Minister for Trade what is the balance of trade between the United Kingdom and the rest of the European Economic Community in (a) motor vehicles and (b) steel over the last 12 months.

Mr. Peter Rees: In the year from September 1981 to August 1982, the United Kingdom's crude deficit of trade with the rest of the Community was £2,024 million on motor vehicles and £461 million on steel.

Mr. Leighton: Is not the Minister at fault with these figures, which show a gross imbalance of trade with the EEC to our disadvantage? That must cause the loss of hundreds of thousands of jobs in the United Kingdom. Do the Government regard it as essential that our motor industry be secured and maintained? If so, will the hon. and learned Gentleman seek to negotiate some sort of balance in our trade with the EEC, as we do with Japan, regardless of the technicalities of the Treaty of Rome?

Mr. Rees: Although the Government are concerned about the health and prosperity of the motor industry, I should prefer the House to look at the problem in its true perspective. Total exports to the rest of the European Community from the United Kingdom are about £22 billion a year. In 1981 our total trade with the European Community showed a surplus of almost £800 million. I suggest that the Labour Party's well publicised plan to withdraw from the European Community must affect jobs and the prosperity of the United Kingdom.

Mr. John H. Osborn: Has my hon. and learned Friend managed to make an analysis of the problems facing the products of Sheffield? In car components, drop stampings and springs, there is severe competition. Certain alloy steels, high-speed steel and stainless steel have a very high import penetration, much of it from the EEC. Will my hon. and learned Friend look at that picture, too?

Mr. Rees: My hon. Friend will be reassured to hear that there is to be a report from the European Commission this month on the import penetration of the special steels market. We shall consider what is appropriate in the light of that report.

Dr. Bray: Is the Minister aware that his Department becomes responsible in January for the inspection of imports to see that they conform with the Davignon conditions in respect of prices? Can he assure the House that adequate staff will be provided and that they will work at least as vigorously as the inspectors in any other country in Europe?

Mr. Rees: I gladly give that assurance.

Mr. Teddy Taylor: Does it not worry my hon. and learned Friend that, at a time when we in Britain have been slashing our steel industry, closing down steelworks and are now thinking of closing down more, on the Continent, where they have the same agreement in operation, in some cases they have been expanding their steel industry, against all the rules of the agreement? Is there not at least a case for putting some restraint on the increasing volume of imports from the EEC when there is ample evidence that the rules on price as well as on structure are being broken?

Mr. Rees: Production quotas inside the Community are essentially a matter for my right hon. Friend the Secretary of State for Industry. However, I can tell my hon. Friend that production quotas, price rules and policing inside the Community are matters of importance and concern to us. He may be reassured to know that the Commission's inspectorate has recently been trebled.

Airline Remittances

Mr. Colvin: asked the Minister for Trade what efforts Her Majesty's Government are making to help recover remittances owed to British airlines which are being held in certain African States.

Mr. Sproat: We remain in close touch with the British airlines affected and will continue, with our posts in the countries concerned, to give all possible assistance towards securing the repatriation of funds unreasonably delayed by overseas Governments. On appropriate occasions we raise the issues at ministerial level, and my hon. Friend the Minister of State, Foreign and Commonwealth Office did so last week with the Foreign Minister of Sierra Leone.

Mr. Colvin: Does my hon. Friend appreciate the damage that the loss of these remittances does to the cash flows of our international flag carriers? Will he take this matter into account when agreeing plans for the restructuring of British Airways' capital debt?

Mr. Sproat: The answer to both parts of my hon. Friend's supplementary question is "Yes." We take this matter extremely seriously. The fact that we have refused to issue a permit to the flag carrier of Sierra Leone shows that we are prepared to take these matters very far.

Mr. James Johnson: Is the Minister fully aware, despite what he said, of the difficulties facing President Siaka Stevens and the Sierra Leone Government in respect of landing fees in London? Will the hon. Gentleman use his good offices to settle this dispute before it escalates to a much worse position in terms of the Africanisation of British-Caledonian flights and other matters connected with Jordan? There is much more lying behind this than the hon. Gentleman appears to think.

Mr. Sproat: I do not know whether there is more behind it than I think. I am aware that airlines round the world are owed $550 million at present, 80 per cent. of which is owed by African States. I agree that it is a pity that we have not been able by negotiation to resolve the problem with Sierra Leone, with which otherwise we should wish to have very friendly relations.

Import Quotas and Tariffs

Mr. Alton: asked the Minister for Trade what is the Government's policy on import quotas and tariffs.

Mr. John Smith: asked the Minister for Trade if he will make a statement on the Government's policy regarding the control of imports.

Mr. Campbell-Savours: asked the Minister for Trade to what extent Her Majesty's Government are committed to free trade.

Mr. Peter Rees: The Government believe that this country, as a major exporter, benefits from a fair and open trading system.

Mr. Alton: I am grateful for that reply. Will the Minister admit that a lowering of the exchange rate would so improve the competitiveness of British industry that it would be unnecessary to impose such artificial measures as import quotas?

Mr. Rees: The hon. Gentleman anticipates the question that is to be put to me by the hon. Member for

Batley and Morley (Mr. Woolmer). The short answer is "No." Although I know that certain sectors of manufacturing industry have been pressing for a lowering of the exchange rate, it would not benefit all sectors, it would not benefit the consumer and it would not benefit the service industries.

Mr. Smith: Does the hon. and learned Gentleman agree that the time has come for the Government to make a survey of Britain's import penetration problems, which are becoming so severe in some areas that they are threatening the existence of whole sections of British industry? Should not the Government make a comprehensive review and introduce a policy of selective import controls more consistent with a world in which free trade is no longer the reality?

Mr. Rees: For some years the right hon. Gentleman was an ornament of the Department to which I belong. He knows that his solution is not consistent with our obligations either under the Treaty of Rome or under the GATT. Nor do I share his gloom when I recall that it is likely that this year, 1981 and 1980 will show the three highest current account surpluses that we have enjoyed since reliable statistics have been compiled.

Mr. Campbell-Savours: If free trade is not working—companies throughout the country are closing—why do not the Government proceed on the basis of bilateral agreements with our overseas competitors in such a way as to protect trade at home, with them having the right to protect their trade, yet at the same time setting out with a common solution, that being the furtherance of trade in the long term and the restoration of our respective economies?

Mr. Rees: I do not accept the premise to the hon. Gentleman's question. I do not believe that the free trading system is failing. There are areas where it is being eroded. That causes us great concern, and we are doing our best to redress that problem. We do not believe in selective import controls. We believe in the multilateral system, which, on the whole, has served this country and most of the world very well since the end of the war.

Mr. Peyton: I accept what my hon. and learned Friend said. A policy of import controls would probably be self-defeating and extremely dangerous. But will he on the fact reflect that if the trebling of the Commission's inspectorate results in inspections being carried out by inspectors who are blind or do not look in the right direction, it will not serve any useful purpose?

Mr. Rees: If these inspectors were blind or ignorant of the essential facts, I agree with my right hon. Friend that this would be a pointless and rather expensive exercise. If he cares to draw my attention to any instances where they have shown these lamentable intellectual or physical disabilities, I shall draw them to the attention of the Commission.

Mr. Jay: Do the Minister's remarks about the merits of an open trading system apply to agricultural goods?

Mr. Rees: That has always been regarded as a special situation in every country. I am happy to pass the responsibility for that answer to my right hon. Friend the Minister of Agriculture, Fisheries and Food.

Sir William Clark: I agree with my hon. and learned Friend that import control would be disastrous for the


economy. However, does he agree that we should take action on tariffs, particularly with Spain? There is a 4 per cent. tariff on motor cars coming to this country from Spain, but if we want to send our motor cars to Spain there is a 37 per cent. tariff.

Mr. Rees: My hon. Friend is right about the gross tariff imbalance between the two countries. It has caused us a great deal of concern. My hon. Friend also anticipates the question tabled by my hon. Friend the Member for Thanet, East (Mr. Aitkin), which we may reach.

Mr. Barry Jones: Will the Minister ponder on the gloomy fact that since the Government took office 209,000 textile jobs have disappeared in Britain? Surely selective import controls are required to protect that great industry. Will the hon. and learned Gentleman bear in mind that in Flint, which is a textile town, male unemployment borders on 40 per cent?

Mr. Rees: I am aware that the hon. Gentleman and many other hon. Members are concerned about the present and future textile industry. As he and the House will know, the Community is in the process of negotiating a series of tough bilateral measures under the terms of the multi-fibre arrangement, which I hope will meet the hon. Gentleman's concern.

Mr. Kenneth Carlisle: Although import controls are often advocated to give time for our industries to become more competitive, can my hon. and learned Friend give an example of when that has happened? Do not import controls tend to put up our costs and entrench our inefficiencies?

Mr. Rees: My hon. Friend makes a powerful case for the consumer, which I am sure the House will note with respect. All I can say with regard to the first part of his question is that we live in hope.

Balance of Trade

Mr. Ioan Evans: asked the Minister for Trade what was the percentage change in the positive or negative balance of trade in manufactures with the European Economic Community and the rest of the world, respectively, between 1978 and the latest available date in 1982.

Mr. Peter Rees: Between 1978 and the 12 months ended September this year the deficit on our trade in manufactures with the European Community increased by 128 per cent. and the surplus on our trade with the rest of the world declined by 4 per cent. In the same period, however, the surplus on our overall balance of payments increased by 300 per cent.

Mr. Evans: As trading with the Community has been disadvantageous for agriculture and more recently for fisheries, where is the advantage in trading with the Community when there has been a deficit in the manufacturing sector since 1978?

Mr. Rees: We have tariff-free access to one of the largest and fastest growing markets in the world.

Mr. Budgen: How long does my hon. and learned Friend expect it will take the EEC to renegotiate the terms of trade with Spain in respect of engineering products? How long does he think it would have taken the United Kingdom by herself to renegotiate those terms if she were not in the EEC?

Mr. Rees: I could not give the answer to either question. The negotiations on the accession of Spain to the European Community have been momentarily put in cold storage as a result of the election in Spain. However, I hope that they will be concluded shortly. If we had been negotiating bilaterally, outside the Community, with Spain, I could not say what would have happened. However, I doubt whether we would have had the same negotiating weight as we do as a member of the Community.

Mr. Hoyle: Does the Minister agree that the appalling figures for trade in manufactured goods with the EEC show that the EEC, far from creating jobs in manufacturing, destroys them? Does that not show the wisdom of the Labour Party's policy to withdraw from the EEC, so that we can plan our own trade in future?

Mr. Rees: Certainly not. If the hon. Gentleman were to look at the statistics he would find that in the 10 years before 1972 our share of world manufactured exports was diminishing at about twice the rate at which it has diminished since our accession to the European Community.

Mr. Teddy Taylor: Does my hon. and learned Friend agree that in none of the 10 years before our membership did we have a deficit with the EEC in manufacturing and that we now have a deficit that is so big that it is equivalent to £400 million a month or 600,000 jobs? Will my hon. and learned Friend accept that that is a case for looking into the matter and seeing what has gone wrong?

Mr. Rees: No, Sir, because I believe that the conclusions that my hon. Friend drew from the statistics are spurious. My hon. Friend always conveniently overlooks our trade in oil and services with the Community.

Origin Marking

Mr. Marlow: asked the Minister for Trade whether he will introduce further measures to encourage the purchase of British goods, with particular reference to origin marking.

Dr. Vaughan: I am very keen that people should recognise British products of quality and be able to buy them. I have no plans for the moment to extend the present origin marking requirements.

Mr. Marlow: Will my hon. Friend take this opportunity to tell the British people about the great benefits of buying British goods, particularly footwear, clothing, electrical goods and so on, in that that increases the amount of work that is available to our people and thus reduces the amount of tax that the Chancellor of the Exchequer has to levy? Will my hon. Friend do all that he can to assist in any campaign that may be mounted to increase the "Buy British" campaign?

Dr. Vaughan: Yes, Sir. Free international trade is in our national interest and is also in the interest of British consumers. However, we should stop playing down the quality of British goods and playing up imported goods, irrespective of their quality. That is what the "Think British" campaign is all about.

Mr. Cryer: Does the Minister accept that it is highly misleading when textile garments, for example, are made


up in this country from imported cloth and are marked "Made in the United Kingdom", according to the regulations that the Minister's Department laid before Parliament? Should not the Government consider, as a matter of urgency, origin marking that makes it clear from where the cloth and garments originate?

Dr. Vaughan: I have carefully reviewed the earlier decision on that, which was discussed when the order was debated on 1 April, but I shall be happy to look at it again.

Mr. Waller: May I press my hon. Friend on the point that the hon. Member for Keighley (Mr. Cryer) has made? Is my hon. Friend aware that research shows that the consumer believes that when he buys an article of clothing labelled "British made", it has been woven in this country and not just made up here? In view of the criticism that there has been of the EEC Commission's proposals on origin labelling, will my hon. Friend have a further look at how the consumers' interests can be strengthened by pressing for a more rigorous regime?

Dr. Vaughan: I am happy to do that. It is essential that when people buy goods they should know where they come from. That applies to goods coming into Britain and also to British goods going overseas. "Made in Britain" is a mark of quality around the world. We need to remember that more often here in Britain.

Mr. John Fraser: Does the Minister recognise that we could do with a bit more patriotism about jobs for British workers? Will he deprecate the practice of multinational car manufacturers putting cars on the British market that give the impression that they have been made in Britain, whereas they have been made in Spain, Belgium or France? Can the Trade Descriptions Act be enforced more rigorously so that there is a prominent description at the point of sale that shows that the goods—whether they are cars or anything else—have been made abroad, if that is the case?

Dr. Vaughan: The hon. Gentleman need not chide us about lack of awareness of unemployment. We are taking every step that we can to increase the production of British goods. We have already taken steps to free the supply of car parts. That is an important step.

£ Sterling

Mr. Woolmer: asked the Minister for Trade what assessment he has made of the effect of the value of the £ sterling on British exports and imports.

Mr. Peter Rees: The exchange rate is only one element in the competitiveness of British goods. As a country we need to continue the improvement in productivity and the reduction of pay settlements.

Mr. Woolmer: Does the Minister accept that in relation to our manufacturing industry the pound is grossly overvalued? Does he accept that the deficit in the non-oil sector of £2 billion in the first three-quarters of this year has been offset solely because of a £3 billion surplus on oil account? Does the Minister accept that manufacturing industry is suffering from an overvalued pound?

Mr. Rees: Certain sectors of manufacturing industry may be affected by the level of the pound, not against United States dollar, but against other currencies.

However, I would not accept that all sectors are affected. Perhaps the outcome of the CBI's debate is evidence of that.

Mr. Haselhurst: Does my hon. and learned Friend accept that we would be better able to arrange a favourable exchange rate for the pound, from the trade point of view, if Britain were to join the EMS?

Mr. Rees: As my hon. Friend knows, we are members of the EMS, but not full members. We have always said that we would consider becoming full members at the appropriate moment, which has not yet arrived. Some of the advantages to which my hon. Friend has drawn attention will weigh heavily in any debates that we have on that matter.

Mr. Foster: Will the Minister confirm that British industry is now 37 per cent. less competitive than it was when the Government came to power? Is he aware that to restore that competitiveness through acting upon wages alone would require a wage freeze for the next five years? Does he agree, therefore, that some measures of trade management are now essential?

Mr. Rees: The competitiveness of British industry has declined by about 30 per cent. since the first quarter of 1979. I certainly do not accept that a wage freeze would be the way to attack that problem. However, the Government's policies have, one hopes, sharpened the efficiency and general performance of British manufacturing and service industry, as shown by the rather successful trade figures of the past three years.

Insurance (Discussions)

Mr. McCrindle: asked the Minister for Trade what consultations he has had recently with the British Insurance Association or the Life Offices Association on future legislation connected with insurance; and if he will make a statement.

Dr. Vaughan: I am in frequent contact with both the British Insurance Association and the Life Offices Association over a number of matters, including commissions. I particularly welcome the good news reported in the press today that the Life Insurance Association is preparing a plan for a new voluntary code. I hope that consumer bodies will be asked to co-operate in this.

Mr. McCrindle: Will the Minister confirm that the Government oppose the suggestion that the commissions paid to intermediaries should be controlled by Act of Parliament, preferring either a voluntary agreement or the operation of market forces?

Dr. Vaughan: We should certainly prefer a voluntary agreement, as I think the industry well understands.

Mr. Lofthouse: Does the Minister appreciate the damage that has been done to the good name of Lloyd's and to the British insurance business generally by the recent alleged scandals? Does he agree that the revelations in the Minet and Howden cases show that self-regulation by Lloyd's cannot be allowed to continue?

Dr. Vaughan: I do not accept what the hon. Gentleman says at all. The fact that an investigation has been necessary in one or two instances should not be allowed to detract from the international reputation of Lloyd's. It


is important to recognise that Lloyd's is a national asset doing a very good job both in this country and internationally.

Mr Moate: Does my hon. Friend agree that if we are to maintain that international confidence in Lloyd's, which is indeed a vital national asset, a more fundamental reappraisal is needed of the methods of supervision and control exercised by his Department? Does he agree that much of the advice and supervision provided by the Department in recent years has not been of the highest quality? What steps are being taken to deal with that?

Dr. Vaughan: As my hon. Friend knows, this was extensively debated when the Lloyd's Bill was before the House. It is now for Lloyd's to proceed as quickly as possible to set up its own voluntary arrangements.

Mr. John Fraser: Does the Minister recognise that the Opposition have been as jealous as anyone to protect the reputation and strength of Lloyd's, and that that is why we supported the Lloyd's Bill, to give it a modern constitution? Nevertheless, does he recognise that the scandals at Minet and Howden justify our concern that self-regulation—the Minister can use only the Companies Act—may not be enough? Does he agree that other forms of statutory and departmental supervision may not be inconsistent with self-regulation for Lloyd's, and will he make an early statement on these matters to the House?

Dr. Vaughan: As the hon. Gentleman knows, we have considerable powers under the Companies Act. The use of section 165 both for the Howden inquiry and now for the Minet inquiry is an important factor. I think the hon. Gentleman will agree that the Department has acted very rapidly on this issue. It is now for Lloyd's to pursue the other arrangements in setting up its voluntary code of practice as quickly as possible.

Blank Recording Tape

Mr. Haselhurst: asked the Minister for Trade whether he has decided not to introduce a levy on blank recording tape.

Dr. Vaughan: No decision has yet been taken on whether a levy would be desirable. Comments on the Government's Green Paper on copyright have shown that views are divided on this and my Department is now considering the situation.

Mr. Haselhurst: Does my hon. Friend agree that any new policy on copyright law would be the better for making a distinction between home taping and commercial piracy and that to impose a levy on blank recording tapes would constitute an unjustified blow against the former?

Dr. Vaughan: We are very much aware of this. That is why we welcome the research now taking place in relation to tape control that would prevent, or at least considerably reduce, tape pirating.

Mr. Cryer: Would not a levy provide some revenue for film producers in the absence of proper and adequate legislation against video piracy, which costs the film industry millions of pounds a year and is destroying the very base of film production?

Dr. Vaughan: I appreciate the weight of the hon. Gentleman's comments. This is one of the aspects that we

are considering. He must also recognise, however, that a general levy right across the board would be an extremely unfair burden on a large number of private individuals.

Mr. Squire: Further to the question asked by my hon. Friend the Member for Saffron Walden (Mr. Haselhurst), and taking the matter to its logical conclusion, would not a levy on blank tapes produce even higher profits for the pirates making the illegal tapes?

Dr. Vaughan: That is why we are reluctant to dive into the idea of a levy unless we are sure that it will be of benefit. At the moment that does not appear to be the case.

British Airways

Mr. Maxton: asked the Minister for Trade if he will make a statement on the recently published accounts of British Airways for the financial year 1981–82.

Mr. Sproat: British Airways' 1981–82 accounts show a pre-interest operating profit for the group of £13 million. After allowing for interest charges of £111 million and extraordinary charges of £426 million, the group made a loss of £545 million. The extraordinary items largely show the results of past mismanagement and misfortunes and do not reflect British Airways' much improved performance. I am confident that British Airways are now making a substantial recovery.

Mr. Maxton: In view of the unsatisfactory way in which the accounts were drawn up, can the Minister say whether he or any of his colleagues were consulted by British Airways or by their accountants about the treatment of certain items in the accounts and whether they were asked if they could give any financial assurances about the future operations of British Airways? If they were, what answer was given?

Mr. Sproat: The accounts of British Airways are a matter for the board of British Airways and its accountants, Ernst and Whinney. On the other matter, we gave a letter of comfort to British Airways that we would undertake that they could keep going for one more year.

Mr. Warren: In his discussions with Sir John King about the accounts, has my hon. Friend had an opportunity, or will he take the opportunity, to discuss the fact that the charges being levied by the Government on domestic air fares in this country are now approaching 40 per cent. of the cost of such fares, which means that the Government are contributing to the apparent loss?

Mr. Sproat: I cannot answer that question as fully as I should like, as some of the charges to which my hon. Friend fairly refers are those imposed by the British Airports Authority. As they are currently the subject of litigation, I am precluded from answering that question in the House.

Mr. John Smith: As British Airways declared a profit of £60 million in the last year of the Labour Government, will the Minister confirm that the mismanagement to which he referred occurred during the lifetime of the present Government? Will he also confirm that if British Airways are doing so well there will be no need for the taxpayer to finance capital reconstruction before the shares are sold off?

Mr. Sproat: The right hon. Gentleman muddles a number of different factors: to be precise, profit and loss


and debt. British Airways now have a debt of £1·1 billion. In my view, that shows gross mismanagement in the past. Questions were asked previously about how private airlines are affected. I believe that it is utterly unfair to the private sector that in the past private airlines have had to compete with an airline that could draw funds on an almost bottomless basis, underwritten by the Government. That is a grotesque unfairness to the private sector and to the taxpayer, and we intend to remove it.

South America

Mr. Foulkes: asked the Minister for Trade what was the value of United Kingdom exports to South America in each of the first, second and third quarters of 1982.

Mr. Peter Rees: United Kingdom exports to Latin America in the first quarter of 1982 were valued fob at £267 million, in the second at £268 million, and in the third at £205 million.

Mr. Foulkes: How many British contracts have been lost in South America as a result of the Falklands war?

Mr. Rees: We do not have any firm evidence to show that any contracts have been lost. It is a matter of speculation whether trade has been affected. The figures that I gave were based on overseas trade statistics. For that purpose Latin America is taken to include Mexico—a country in some difficulty—and the Argentine, which is obviously a special case.

OVERSEAS DEVELOPMENT

Zimbabwe

Mr. Proctor: asked the Secretary of State for Foreign and Commonwealth Affairs if he has any plans to make changes in the British aid programme to Zimbabwe.

The Minister for Overseas Development (Mr. Neil Marten): Before answering this question may I express my sadness at the death of Mr. Frank McElhone, who shadowed me for three years.
The answer to the question is "No, Sir."

Mr. Proctor: Will my right hon. Friend give an assurance that if there were any changes in the constitution of Zimbabwe, leading to a one-party State, he would review the matter again.

Mr. Marten: That would depend on when the changes took place. If constitutional changes took place after the period fixed by the Lancaster House agreement it would be an internal matter for the Zimbabwe nation, which would have to decide whether to have a one-party State, such as Kenya, or continue with the two-party State.

Mr. Brocklebank-Fowler: What proportion of the funds allocated for land purchase have been disbursed? What progress has the Minister made in persuading other Governments to contribute to an international fund for purchasing further land for resettlement?

Mr. Marten: We understand that, to date, the Netherlands, Kuwait and Saudi Arabia have committed funds for resettlement, together with the European development fund and the African Development Bank. Some Governments have been prepared to meet the cost

of land purchase, but the money is available as soft loans, and Zimbabwe operates on grants. I cannot give precise details about expenditure to date.

Mr. Douglas Hogg: When the Minister holds discussions with the Zimbabwe Government about changes in the aid programme, will he make the point that the British Government are dissatisfied that many Britush citizens have had their funds frozen in Zimbabwe? We want some of those funds released.

Mr. Marten: I absolutely agree with my hon. Friend. We have made representations to the Zimbabwe Government, who have, on occasions, released funds when people have been in desperate circumstances. However, Zimbabwe cannot release all funds until its balance of payments has improved.

Rwanda

Mr. Foulkes: asked the Secretary of State for Foreign and Commonwealth Affairs what is the level of United Kingdom aid to Rwanda in the current year; and whether he has any plans to increase aid to Rwanda.

Mr. Neil Marten: In the current financial year we expect to spend about £31,000 on technical co-operation. In 1983–84 such expenditure is expected to increase substantially.

Mr. Foulkes: Does the Minister agree that Rwanda is a key non-Commonwealth African country? Will he ensure that there is a substantial increase in aid to Rwanda, which has great potential for good relations with the United Kingdom?

Mr. Marten: I agree with the hon. Gentleman and shall certainly try to do what he asks.

Sri Lanka

Mr. Hill: asked the Secretary of State for Foreign and Commonwealth Affairs how much grant-aid the United Kingdom has given to Sri Lanka in each of the past five years.

Mr. Neil Marten: I shall circulate the figures in the Official Report, but for the calendar year 1981 it was £22,859,000.
This sum reflects the start of expenditure on the Victoria dam project. Our commitment for this project is £100 million, to be spent mainly in the financial years 1980–81 to 1984–85.

Mr. Hill: I congratulate the Minister on those figures. That Commonwealth country is very friendly with the United Kingdom. Has there been a shortfall in the finance available for the completion of the dam? If so, will it retard the completion date?

Mr. Marten: Not as far as I know. The Sri Lanka Government have agreed to fund any overrun costs.

Mr. Sever: I thank the right hon. Gentleman for his kind remarks about our late colleague, Mr. Frank McElhone. Opposition Members are saddened by his loss. He spoke for us on overseas matters. I hope to do some justice to his cause.
Is it true that the tea companies bring out of Sri Lanka far more in profits than our Government invest in overseas development and aid programmes?

Mr. Marten: I am sorry, but I shall have to investigate that matter and write to the hon. Gentleman.

Following are the figures:


Date



1977
£3,933,000


1978
£8,310,000


1979
£12,242,000


1980
£31,492,000

Ethopia (Food Aid)

Mr. Andrew F. Bennett: asked the Secretary of State for Foreign and Commonwealth Affairs what response Her Majesty's Government have made to the requests for food aid made by the Ethiopian Government to meet the famine in that country caused by drought.

Mr. Neil Marten: We have received no such request, but are monitoring the situation.

Mr. Bennett: What is the state of drought in Ethiopia? Have the Ethiopian Government approached the EEC for aid and, if so, will the British Government support that?

Mr. Marten: There are conflicting reports, but our embassy in Ethiopia is monitoring the position carefully. The first stage is that the Ethiopian Government must make a request to our local embassy. On the question of the EEC, in 1982 it provided 20,000 tonnes of cereals, 2,000 tonnes of milk powder and 1,000 tonnes of butter oil.

Mr. Bowen Wells: Although I have every sympathy with those who are starving in Ethiopia, may I ask my right hon. Friend to ensure that if food aid is given to Ethiopia, its Government change their policies so that the country can produce more of its own food?

Mr. Marten: We are doing all that we can to persuade all developing countries to produce more of their own food.

Mr. James Johnson: Is it not a fact that the Ethiopian Government under the late Haile Selassie annexed Eritrea, and that the present Government, under Mengistu, conquered the Ogaden? As Eritrea is peopled by ethnic Eritreans—the Tigre and others—and as there are ethnic Somalis in Ogaden, will the Minister ensure that if the Government give food and goods to Addis Ababa, they reach those subject peoples?

Mr. Marten: We shall certainly do our best. One problem in giving food aid is ensuring that it reaches the right people.

Lebanon (Relief Aid)

Mr. Major: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement about emergency relief aid provided by the United Kingdom to the Lebanon.

Mr. Neil Marten: I have just approved a grant of £100,000 to the International Committee of the Red Cross. In total we have so far contributed some £4 million to direct relief aid and I am circulating details in the Official Report.

Mr. Major: I am grateful to my right hon. Friend for that comprehensive reply. Is he aware that Britain's

gesture in financing the maintenance of two medical teams in the Lebanon is especially welcome at this difficult time? Does he anticipate that the Government will extend that relief beyond the three months currently agreed?

Mr. Marten: When the three-month period expires, we shall examine the position. I have pledged support for three months. The medical teams provided by Christian Aid and Save the Children Fund will cost up to £100,000.

Mr. Sever: Is the Minister aware that many of us will be grateful to him for his response to this question? Is he further aware that we are anxious that he should give a commitment this afternoon to continuing help in that dreadful tragedy? Will he assure the House today that aid will be forthcoming as and when representations are made to him?

Mr. Marten: No, Sir, but I assure the House that the Government will certainly consider any approaches on the matter.

Mr. Hooley: Will the Government ensure that the accommodation provided for the Palestinians whose homes have been wrecked by the Israeli invasion is permanent and weatherproof and does not comprise just tents, which do not offer sufficient protection for families in the winter?

Mr. Marten: I cannot give that assurance either, but I shall look into the matter. In addition to the £4 million I mentioned, we gave a further £4 million to the United Nations Relief and Works Agency for just that purpose.

Mr. Lawrence: Are not the Lebanese Government refusing offers of more durable accommodation lest it should be considered to be permanent?

Mr. Marten: I have not heard that said before, but I shall look into the matter.

Following are the details:

£ million


1. Cash grant to International Committee of the Red Cross
0·1


2. Food aid to United Nations Relief and Works Agency for Palestine Refugees in the Near East (Flour)
1·0


3. Disaster aid (Medical supplies, blankkets, food and cash grants etc.)
0·4


4. United Kingdom share of EC contributions
2·5

[In addition the United Kingdom is contributing in 1982 £4 million in cash to the United Nations Relief and Works Agency for Palestine Refugees in the Near East, of which some will be used in the Lebanon.]

Aid Expenditure

Mr. Deakins: asked the Secretary of State for Foreign and Commonwealth Affairs if aid expenditure in 1983–84 will be more, in real terms, than expenditure in the current year.

Mr. Neil Marten: The hon. Member should await a statement on public expenditure levels which the Chancellor of the Exchequer is due to give to the House later this afternoon.

Mr. Deakins: Has not the position of poor countries become immeasurably worse in the past 12 months as debt burdens have mounted while commodity prices have failed to rise? Will the Minister at least undertake to ensure that the interests of poor countries will be a top priority under


the public expenditure heading for this item next year rather than the commercial considerations that have so far ruled the aid programme?

Mr. Marten: We shall adjust our priorities when we see what is available, and the hon. Gentleman will hear about that later today.

The Economy

The Chancellor of the Exchequer (Sir Geoffrey Howe): With permission, Mr. Speaker, I should like to make a statement.
As the House knows, it is customary at this time of year to publish outline public expenditure plans and proposed national insurance changes for the year ahead, together with the economic forecast required under the Industry Act 1975. This year, as foreshadowed in the Government's reply to the report of the Treasury and Civil Service Select Committee on budgetary reform, we are bringing these together and publishing them in an autumn statement which I shall today be laying before the House. I am grateful to my right hon. Friend the Member for Taunton (Mr. du Cann) and the Select Committee for the initiative which has led to that development.
During the past year, monetary conditions have exerted downward pressure on price rises and substantial progress has been made against inflation. In January the rate of inflation was 12 per cent.; it is now around 7 per cent.; and we envisage a 5 per cent. rate early in 1983. Interest rates have fallen even more sharply, with bank base rates down a full seven points from their peak of 16 per cent. last year to 9 per cent. today. The CBI has calculated that each percentage point fall benefits British industry by around £250 million in a full year. We shall continue to maintain downward pressure on the monetary aggregates to achieve further success in the battle against inflation. Interest rates will continue to reflect the indicators of monetary conditions which I described in my Budget speech.
As the statement explains, the growth in output this year—in this country and throughout the Western world—has been lower than anticipated. For next year the Industry Act forecast now suggests a 1½ per cent. increase in our GDP. That is close to what is expected for most other industrialised countries. Unemployment remains the nation's most distressing problem. As in other countries, further rises are expected to continue into next year, although they should moderate as output picks up in response to lower inflation and lower interest rates.
Public borrowing remains under firm control, which of course is one reason for the fall in interest rates. We expect the PSBR this year to be within the figure of £9½ billion expected at the time of the Budget. Final decisions about the level of next year's borrowing requirement will not of course be taken until my 1983 Budget. The current forecast suggests that the scope for possible tax reductions in 1983–84 could be of the same order as was indicated at the time of the last Budget. That is on the basis of conventional assumptions as to the revalorisation of direct taxes and excise duties. It also assumes the same 1983–84 PSBR, as a percentage of GDP, as was assumed at the time of the last Budget, and takes account of the decisions which I am announcing today.
The public expenditure planning total for 1983–84 will be £120·06 billion. That is lower than the provisional figure for 1983–84 published on Budget day this year. It is the first time since 1977 that a Government have been able to stop expenditure plans for a particular year rising with each annual review. Compared with the plans for the current year, the new total is a slight fall in cost

terms—that is, in constant prices. The ratio of public expenditure to GDP will come down from 45 per cent. to 44 per cent.
Details of the changes in individual programmes are summarised in the statement. Social security programmes have been adjusted to take account of the rapid reduction in inflation. This month's benefit uprating is 11 per cent. Even allowing for the 2 per cent extra to compensate for last year's shortfall, that is well over the current rate of inflation. We accordingly intend to make an adjustment to next year's uprating. Meanwhile, those in receipt of benefits will continue to receive payment at a rate above that needed to compensate for price rises in the last year. As is customary, the exact size of next year's uprating will not be decided before Budget time.
The House will be glad to hear that the resources that we had planned to make available for a number of important programmes have been increased. We plan additional gross expenditure of £260 million on two new special employment measures—the community programme and the job splitting subsidy—which were announced earlier this year. For housing, the provision of an extra £49 million and a continuing high level of receipts from council house sales will allow gross capital spending to be at least 10 per cent. higher than the expected level this year.
More money will be made available for the urban capital programmes to support the new urban development grant programme and the urban development corporations in London docklands and Merseyside. These two changes represent a significant new boost to the construction industry.
In addition, £96 million more has been allocated to law and order programmes, mainly on police and prisons. In the Health Service we are providing an extra £80 million in England, which should continue the growth in the level of services that has already taken place under this Government. Comparable increases will be made for the rest of the United Kingdom.
Finally, provision for defence in 1983–84 has been increased by £622 million because of extra costs following the Falkland Islands action. That increase is over and above our commitment to meet the NATO 3 per cent. per annum real growth target. It will fund purchases of equipment to replace losses this year and will ensure the future security of the Falkland Islands.
To find room for these increases within an unchanged total, we have been able to secure economies elsewhere. We have also transferred to programmes part of the provisional contingency reserve set aside in the 1982 White Paper, but we have left a substantial contingency reserve of £1·5 billion, which we shall review again nearer the Budget.
Full details of public spending plans for next year and for 1984–85 and 1985–86 will be set out in the public expenditure White Paper which we expect to publish early in the new year.
My right hon. Friend the Secretary of State for Social Services is this afternoon announcing details of changes in national insurance contribution rates and limits for next year, and will be publishing the report of the Government Actuary on the national insurance fund. If we were fully to balance the fund for next year, increases in employers' and employees' contributions of nearly 0·4 per cent. each would be required. But we are anxious both to minimise additional burdens on industry and to diminish the effects


of contribution increases for employees, so we have decided that the increases should be limited to 0·25 per cent. each for employers and employees. The upper earnings limit will go up only to £235, rather than £245 which would be the maximum permitted by statute.
Taken together, these measures mean that contributors will pay a little over £200 million less next year than would have been required fully to balance the fund. The cost to the PSBR has been taken into account in the forecast.
I turn now to the national insurance surcharge which was introduced and then increased to 3½ per cent., by the previous Government. It has long been criticised, and rightly so, by commerce and industry. As I said in my last Budget statement, it raises production costs, it is not rebatable on exports, and it either puts up prices or cuts into profits.
I was able in March to announce an effective reduction of 1 per cent. in the rate for private sector employers, from 3½ per cent. to 2½ per cent., for the year 1982–83. I am pleased to inform the House that we can now take another substantial step in the right direction, by reducing the rate for 1983–84 by a further 1 per cent., so bringing it down to 1½ per cent. The cost of this to the PSBR has been reflected in the forecast.
The public sector will not gain from the change, but the benefit to private employers in 1983–84 will be around £700 million. Overall, this will more than offset the increase in their costs due to the new NIC rates and levels. A table showing the overall effect for employers and employees of the NIC and NIS changes for next year has been put in the Vote Office today.
That is not all. I intend that for private sector employers ½ per cent. of the NIS reduction from April 1983 should be brought forward and made effective for 1982–83 also—that is to say, for the current year. Hon. Members will know that to change the NIS rate at this time of year presents considerable administrative problems, but we have found a way of overcoming them. The equivalent of a ½ per cent. reduction for the whole year will be given by reductions in employers' payments of national insurance surcharge and national insurance contributions for January, February and March next year. Details and guidance will be sent in due course to employers.
That further benefit will be worth £350 million in the current year. Legislation will be needed for the new arrangements both this year and next. A Bill will be introduced at an early date. I am sure that it will commend itself warmly to the House as providing a substantial reduction in the costs faced by private sector commerce and industry.
The House will want to study the autumn statement carefully. The format is new and, I hope, helpful and the scope rather wider than before. It demonstrates that we are determined, within the framework of our monetary and fiscal policies, to continue to do what we can to relieve the burden of taxation so as to move towards renewed growth and more employment. I hope to be able to say rather more if I am fortunate enough to catch your eye, Mr. Speaker, later in the course of our current debate.

Mr. Peter Shore: The Chancellor has made a long statement. It is as full of information and documentation as it is remarkably empty of any promise

or hope for the British people or for the rescue of our savagely damaged economy after three and a half years of the Chancellor's regime at the Treasury.
It is a depressing statement. It marks the fact that we have often brought to the attention of the House—the failure of the strategy and judgment of this year's Budget. It also marks the failure of the past three and a half years of Government economic policy. The Government's Budget was based on the premise that there would be an upturn and a bottoming out of the economy. The Opposition said that that would not happen. The Chancellor has now had to confess that the rate of growth in Britain in the past year has been 0·5 per cent. We all know that we are in the middle of a massive recession. The Chancellor has done virtually nothing, apart from a couple of cosmetic touches to the national insurance surcharge, to face that challenge.
I have several questions to ask the Chancellor. The first relates to what he said about the adjustment to next year's uprating of old-age pensions. Is he aware that the cost of not adjusting that uprating will be only £250 million during the present fiscal year? Is he further aware that the cost for a full year would be only £500 million? Is he aware that the cost of living affecting retirement pensioners and most people on low incomes is much higher than the proposed increase because their pattern of expenditure is different from that of the rest of the country?
It is monstrous for the Chancellor to claw back from people, the great majority of whom are having a more difficult time than they can recall, this year's so-called overpayment. Can he justify making yet another major statement and failing to make good the 5 per cent. that was taken away from the unemployed? The Chancellor said that he is worried about the number of unemployed. It is a scandal that so many people should be made unemployed, but, having made them unemployed, he takes away a substantial part of their benefit. What type of generosity is that?
I shall now deal with the changes in the national insurance surcharge. I had hoped that, at the very least, the Chancellor, if he cannot bring himself to do anything else to assist British industry, would have removed the national insurance surcharge in next year's Budget. He said that, apart from a relatively small, once-and-for-all three months' cash injection in the first quarter of next year, the net result would be that, minus the increased employers' national insurance payments, the cash flow of firms throughout Britain will be no more than £175 million higher than it is now. I should be grateful if he would confirm that. I believe it to be the case.
I turn now to a rather surprising omission from the Chancellor's long statement. He said nothing about the rate support grant for the coming year. Last year we were told what the percentage rate support grant would be. We were also told of the anticipated increase in council house rents. What are the present estimates for both those important items? They are important because unless something is done about rate support grant ordinary people and industry will face more increases in rates next year.
I shall conclude with three questions. The first relates to unemployment. The Chancellor has already made it plain in the document that accompanies his statement that the unemployment assumption is to increase from the 2·9 million of this year to no less than 3·2 million next year. As the Chancellor believes that he has reduced inflation to single figures, can he tell us when the economy will take


on the predicted orderly, natural and spontaneous growth upon which the whole of the Government's policies are predicated?
Secondly, will the Chancellor confirm that personal living standards are now running at 3½ per cent. below what they were when he took office in 1979? What is his assumption or forecast for living standards for next year?
Thirdly, having examined the industrial forecasts that accompany the Chancellor's statement and having noted that the balance of trade is expected to deteriorate—although it is not quantified—I should like to know whether Britain, for the first time in recorded history, is importing more manufactured goods than it is exporting to the rest of the world?
This statement comes after three and a half years of Conservative Government, and covers the prospects for the last year of a five-year Parliament. It builds upon a record of failure, offers no prospect to the country, and shows that the Government have not even begun to understand what is needed to tackle the problem that they face.

Sir Geoffrey Howe: The right hon. Gentleman began with a caricature of the economic improvements that have taken place in recent years. Am I to take it that he brushes to one side the prospect of inflation down to 5 per cent.—a formidable and important achievement? Am I to take it that he brushes aside a fall in interest rates of 7 per cent., which would not have been achieved without firm control of public spending and borrowing for which we received little support from him?
The right hon. Gentleman drew attention to the unemployment assumptions that are set out in the autumn statement and the Government Actuary's report. They show an average increase next year of 300,000—from 2·9 million to 3·2 million. As I said in my statement, that rate of increase is likely to decrease as the year goes on.
The right hon. Gentleman asked about council house rents. The autumn statement shows that the Secretary of State for the Environment will be consulting the local authority associations on a rent increase of 85p per dwelling per week. If that figure is confirmed, it will mean no increase in real terms in 1983-84, and it will enable us to provide for a real increase in housing capital investment that year. I hope that the House will welcome that.
The right hon. Gentleman also asked about the rate support grant. The announcement of the provisional figure has already been made by my right hon. Friend the Secretary of State for the Environment. Consultation is taking place on that, and I have nothing further to add.
As to the adjustment in pensions, the pension increase provided for in this year's Budget not merely provided fully to make up for the 2 per cent. shortfall in the preceding year but also, as it turns out, for more generous provision for price increases than those that have taken place this year. If we are to maintain real value in that sense, it is bound to mean adjustments from year to year, just as we have experienced in successive years. There is nothing extraordinary about that, and I assure the right hon. Gentleman that the pledges are being maintained.
With regard to living standards, the right hon. Gentleman should by now understand that one of the causes of our economic difficulties was the substantial increase in real personal disposable income that took place between 1977 and 1980 as a result of the wage explosion that concluded the disasterous period of office of the

Labour Government. To some extent, that increase has been reversed, but there is still further need, as the right hon. Gentleman pointed out, for improvements in our competitiveness if we are to expand our rate of growth and increase our share of the domestic market. In fact, in the current year, real demand in the economy has increased by 3 per cent. We shall get a larger share of that for British manufacturers and exporters by continuing to improve our costs. I hope that I shall have the unqualified support of the right hon. Gentleman for the need for continued moderation in pay settlements if that is to be achieved.
The last feature is the need to reduce the overall cost burden falling on employers. By wringing his hands in horror at the reduction in the rate of national insurance surcharge, the right hon. Gentleman astonished and amazed the House. As a result of the changes in national insurance contribution and national insurance surcharge, the total reduction in the cash burden on employers in the next year will be £686 million, about £450 million of which will be a reduction wholly to the benefit of the private sector.
I hope that the House will be struck by the contrast between this Government's record, who, by taking national insurance contribution and national insurance surcharge together, have effected a reduction in the combined burden of 1½ per cent., and the record of the Labour Government, who, in spite of the right hon. Gentleman's hypocrisy today, increased the joint burden of those taxes by 5 per cent.

Mr. Shore: The Chancellor replied in his own way to my question about what had happened to living standards and confirmed that they had fallen. I asked about the prospect for the coming year based on his own estimate. I should like an answer to that question.
The question of competitiveness relates very much to the national insurance surcharge. The case for getting rid of the national insurance surcharge is to increase the competitiveness of British industry. Will the right hon. and learned Gentleman confirm that the loss to Britain's international competitiveness since he took office is still 36 per cent., and what improvement will there be as a result of today's statement?

Sir Geoffrey Howe: The right hon. Gentleman is right to point out that there is still a significant loss of competitiveness now compared with some years ago. He must understand that a large component of that loss was due to the wage explosion that took place under the Labour Government.
As I have already said, real personal disposable incomes for people in work continued to rise almost regardless of economic trends for a number of years, perhaps until a year ago. If we are to secure a further sustainable advance in personal living standards and, at the same time, to achieve a reduction in the number of people out of work—which is surely what all hon. Members would like—it is of crucial importance to continue improving our competitiveness by achieving further moderation in the rate of pay settlements. I should like the right hon. Gentleman specifically to endorse that. I am grateful to him for his welcome for the reductions that we have been able to make in the national insurance surcharge burden that the Labour Government left on British industry.

Several Hon. Members: rose—

Mr. Speaker: Order. As the content of this statement can and will be discussed today, tomorrow and the day after, I shall allow 20 minutes for questions, which will be very generous. We shall then move on to the next business.

Mr. Roy Jenkins: Does the Chancellor reject the London Business School's forecast that inflation, after falling in the second quarter, will thereafter begin to rise again? What is his own forecast for the fourth quarter of 1983? Would it not have been far more helpful to British industry to have abolished the national insurance surcharge now—a jobs tax clearly perverse in present circumstances—rather than to wait and hope to give personal income tax concessions in the Budget which, because of their unprecedentedly high import content, will have nothing like a similar benefit to the activity in the economy?

Sir Geoffrey Howe: I do not accept the London Business School's expectations for inflation at the end of next year. The right hon. Gentleman will find that my statement says that at the end of 1983 the inflation rate may still be around 5 per cent. I am sure that he will endorse the proposition that if we are to continue to achieve further progress in reducing the rate of inflation at the same time as enhancing employment prospects, it is important to take the main remedy to reduce costs to British industry, which is to achieve further moderation in pay settlements.
I accept that the national insurance surcharge represents an addition to those costs. It is for that reason that I have reduced it by a full percentage point in the current year and intend to do so in the next year. I intend to do that in a way that maintains effective control over the size of public sector borrowing, which is a crucial component in the reduction in interest rates, which in turn is an even more significant element in industrial costs.

Mr. Maurice Macmillan: Could my right hon. and learned Friend tell the House how the total employers' share of the contributions to national insurance compares with the share paid by our competitor employers overseas?

Sir Geoffrey Howe: There are wide variations. Taking a very general average figure, it is my impression that employers overseas pay a rather larger sum in contributions of this kind than is paid in Britain in order to sustain social security programmes.

Mr. Jack Ashley: As the Chancellor of the Exchequer's derisory statement makes it clear that he cannot or will not tackle the scandal of mass unemployment, will he at least provide funds for the payment of long-term supplementary benefit for people who are unemployed in the long term? Would not that be at least a crumb of comfort until we have a Government who are less sanguine about mass unemployment and who are prepared to do something about it?

Sir Geoffrey Howe: I understand the right hon. Gentleman's anxiety about unemployment, and I know that it is genuine and strongly felt. We have to make our choice as to the ways in which we contribute to reducing the burden imposed by unemployment. It is for that reason that I have announced today that £260 million will be devoted to the two employment programmes that I have identified.

Mr. Terence Higgins: Will my right hon. and learned Friend note that on the Conservative Benches we do not take for granted the substantial reduction in the rate of inflation and in interest rates? The reduction in the rate of inflation will be very much welcomed, not least by pensioners. I suggest to him that it is essential now to give priority to cutting industrial costs. In that context, will he stress to the Labour Party and the TUC that excessive wage claims, particularly in the public sector—for example, in the water, gas and electricity industries—will further endanger the level of employment if they are persisted with? Therefore, we must take the strongest possible stand against claims for pay increases which are far above the level of inflation.

Sir Geoffrey Howe: I am grateful to my right hon. Friend for his support and welcome for what I have said, and underline the importance of his point. It is crucial to continue to secure a reduction in public sector costs as part of the process of reducing inflation, and a key contribution can be made to that if we achieve moderation in pay settlements within the public sector, in particular in the industries to which my right hon. Friend has referred.
I hope that the Labour Party will find it in its heart to underline and endorse the importance of that message. All too often it is given to complaining about high increases in prices in the public sector utilities, but it is important, if it makes that case, to join us also in arguing the case for a reduction in pay settlements.

Mr. Richard Wainwright: Does the Chancellor of the Exchequer recall that as an integral part of his Budget statement in March he included a long passage about energy and fuel prices, including the announcement of a gas price freeze, which expires next month? Has he anything to tell the House today on that theme?
Secondly, when the Chancellor referred to modest increases in the housing programme and the community programme, he was wholly specific about the figures, but when he came to the other side of the account he merely said that he was securing economies elsewhere. Will he be equally specific in describing those economies?

Sir Geoffrey Howe: The hon. Gentleman will see the answer to his last point if he studies, as I know he will, the autumn statement produced in response to his representations, among others, as a member of the Select Committee on the Treasury and Civil Service.
With regard to energy prices, the British Gas Corporation has today confirmed that the freeze on the contract price of gas sold to industry will continue until October 1983. That is a matter for the corporation to decide, but it is a decision that it has been able to reach within the agreed external financing limits.

Dr. Jeremy Bray: In view of the omission from the statement of any reference to the exchange rate, is it a coincidence that the rate of reduction of interest rates has been such that the effective exchange rate has not changed? Is not the Chancellor of the Exchequer keeping British industry uncompetitive in order to protect the Government's claim that they have reduced inflation?

Sir Geoffrey Howe: The hon. Gentleman understands that the factors that influence the exchange rate are many and diverse. The assumption made in the autumn


statement—it was, of course, presented as an assumption—was that there will be no significant variation in the exchange rate. The hon. Gentleman will appreciate that interest rates in Britain during the past 12 months have fallen by about 7 per cent. compared with an average fall of only 4 per cent. in other countries. He will also have noted the conclusion of the debate conducted by the CBI on the exchange rate in Eastbourne last week.

Sir William Clark: Is my right hon. and learned Friend aware that all thinking people will not only congratulate the Government on their economic strategy in reducing inflation, interest rates and the national insurance surcharge but will welcome it? Could he assure the House that he will keep a close watch on public expenditure? Although we welcome the fact that the proportion of GDP has gone down from 45 to 44 per cent., if the Government were to adopt the official Opposition's policy and to increase public expenditure that would put the whole of the economy into jeopardy.
Having given this assistance to industry, will my right hon. and learned Friend, between now and the next Budget, give urgent consideration to reducing the standard rate of income tax?

Sir Geoffrey Howe: I understand my hon. Friend's concern with personal taxation as well as with the tax burden on the industrial and commercial sector, and obviously have that in mind now, as at all times.
I am grateful to my hon. Friend for his support concerning the importance of controlling public expenditure. It is well worth emphasising that all the countries which find themselves facing increasing difficulties, as their public sector borrowing becomes increasingly difficult to control, and as their interest rates and inflation rates likewise become increasingly difficult to control, are those which have not committed themselves to the reduction of the public sector deficit in the way that we have done. It is important for us to maintain and sustain that achievement as a crucial part of the foundation for the restoration of sustainable growth.
I take this opportunity to pay tribute to my right hon. and learned Friend the Chief Secretary for his remarkable achievement on public expenditure, in co-operation and consultation with the rest of our colleagues.

Mr. Harry Ewing: The documents concerning the autumn statement published today contain a passage about old-age pensions. The Chancellor of the Exchequer states there that he is working on the basis of a 5 per cent. inflation rate for next year, less the 2 per cent. overpayment that he claims will be made to pensioners in the next few days. That leads one to the conclusion that the uprating of pensions for 1983–84 will be about 2½p to 3p in the pound. If that is the case, on what basis has the Cabinet taken a decision to make the old-age pensioners pay for the Prime Minister's bungling incompetence in leading us into the Falklands crisis?

Sir Geoffrey Howe: None of the hon. Gentleman's statements is correct. We do not yet know the final result concerning the rate of inflation. The inflation figure for November this year, which is one of the components, is not yet known. By definition, the inflation forecast for next year is not yet known. Those are two components essential to any decision that has to be taken in this respect,

which will not be announced until Budget time. Therefore, it is wrong to suggest that the pensioners or any other group are bearing the cost of the necessary expenditure in achieving our national objectives, with the support of the nation, in the south Atlantic.

Mr. Anthony Nelson: Does my right hon. and learned Friend agree that, while many of us hope that there will be some scope for real improvement in pensions next year, the implications for public expenditure and the burden of taxation would be altogether unacceptable if pensions, benefits and allowances of all kinds were to be uprated only on the basis of forecasts and were unable subsequently to be readjusted when those forecasts proved too modest?

Sir Geoffrey Howe: I entirely agree with my hon. Friend. He underlines the point that I made in my statement.

Mr. A. W. Stallard: Is the Chancellor aware that his statement on the clawback of benefits from pensioners and those on supplementary benefit will be greeted with anger and resentment by millions of people throughout the country? He says that he has been able to make arrangements to adjust the handout on the national insurance surcharge between now and December and January, but pensioners have been asking for many years that their pensions should be uprated nearer the date when the increase is announced so that they do not have to wait nine months for the extra money. Is the Chancellor aware that pensioners will not understand why there can be an adjustment for the national insurance surcharge but not for pensions? The Government have made considerable savings at the expense of pensioners and others in the past three and a half years, and the pensioners' index has been running four or five points ahead of the retail price index for some months. Will the Chancellor reconsider his decision to claw back pensions and to make pensioners pay for other handouts?

Sir Geoffrey Howe: The hon. Gentleman and the whole House must remember the point made by my hon. Friend the Member for Chichester (Mr. Nelson). Benefits to pensioners and others from the national insurance fund have to be paid for out of the fund. That principle was understandably endorsed by the Public Accounts Committee not long ago. Its effectiveness has been manifested by the need, that I have recognised today, for a 0·25 per cent. increase in employees' contributions. That represents a practical limit to the generosity of each member of the working population. Pensioners and other beneficiaries will receive an increase of 11 per cent. this month and will be better off in real terms for the whole of this year. The maintenance of the real value of benefits is bound to mean adjustments from year to year. When we came into office in May 1979 we adjusted the pension upwards by 1·9 per cent. to take account of the shortfall under the Labour Administration.

Mr. Nigel Forman: While welcoming the fact that my right hon. and learned Friend has felt able further to reduce the costs to British industry by about £600 million in a full year, may I ask him to bear in mind the increasingly strong case for further cuts in direct taxation, especially for the lower paid? I am convinced that that would not necessarily lead to a significant increase in the propensity to import.

Sir Geoffrey Howe: My hon. Friend makes the same point as was made by my hon. Friend the Member for Croydon, South (Sir W. Clark). It needs to be taken into account in our consideration of these matters.

Mr. George Foulkes: Is not the Chancellor aware that we heard him clearly say that he was adding to the defence budget a sum equivalent to the amount that he is taking away from old-age pensioners? Will he answer the question of my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) and tell the House why he has picked on the pensioners to pay for the Falklands war?

Sir Geoffrey Howe: The hon. Gentleman may try as he likes to make a false connection and a false point, but they remain entirely false. The necessity to pay for the Falkland Islands expenditure was recognised by the House from the start to the finish of the campaign. The increase in expenditure in that area will, incidentally, lead to a significant increase in orders for the defence equipment industry, in Scotland as elsewhere. Aside from that, when I have discussed the position of pensioners, I have made it clear that the pattern of changes that we have made is maintaining the pledges that we have so far made to the House.

Mr. Jim Lester: I congratulate my right hon. and learned Friend on his timely response with measures that will be helpful to the construction industry and to British manufacturing industry, about which there is considerable anxiety on both sides of the House. Like Oliver Twist, one is always tempted to ask for more and I should welcome an assurance from my right hon. and learned Friend at least on the principle of the restoration of the 5 per cent. abatement of unemployment benefit, if not on the practice.

Sir Geoffrey Howe: That is a matter on which I have nothing to add to what has already been said.

Mr. Barry Jones: Does not the Chancellor's statement signal a continuation of his and the Government's war on the unemployed? Why is he so reluctant to take urgent action on behalf of the communities that are suffering from mass unemployment?

Sir Geoffrey Howe: The Government are not engaged in a war on the unemployed. Like every other Government in the Western industrial world, we are engaged in the difficult and prolonged battle against rising unemployment. As my right hon. Friend the Prime Minister pointed out last week, unemployment has been rising significantly faster in other countries than in this country over the past year or so. The House must recognise, as I am sure that the majority of hon. Members do, that the most effective way of combating unemployment is to continue the success against inflation and high interest rates and, above all, to continue to improve our competitiveness, for which further moderation in pay settlements is crucial, and in that I still invite the support of the Opposition.

Mr. Chris Patten: May I follow up the question of my hon. Friend the Member for Beeston (Mr. Lester)? Do the public expenditure plans for the coming year include provision for restoring the 5 per cent. cut in unemployment benefit?

Sir Geoffrey Howe: That is a matter which, as I have said already, remains for consideration.

Mr. Michael Meacher: Will the Chancellor confirm that, even after his package, unemployment will rise to more than 3½ million next year? If he believes that large personal tax cuts will be a significant source of extra demand for domestic industry, and not just an election bribe, how will he prevent more than two-thirds of the extra demand from being dissipated on imports, which is exactly what happened last year?

Sir Geoffrey Howe: If that is the hon. Gentleman's analysis, it underlines the importance of improving the competitiveness of British industry and of further moderation in pay increases. I ask yet again whether the hon. Gentleman and the Labour Party endorse and emphasise the crucial importance of moderation in pay bargaining to deal with the problems that he raises.

Mrs. Shirley Williams: The Chancellor repeated on several occasions during his statement that unemployment was due to the world recession. Is he aware that the most recent report of the International Monetary Fund says that the British Government have brought about a more restrictive shift in policy than any other Western Government and that one of the two factors responsible for our loss of competitiveness is the Government's restrictive monetary policy? Will he confirm that the reason why he can do so little is that the competitiveness of this country has been reduced by, among other things, the Government's own policies?

Sir Geoffrey Howe: I certainly do not confirm that. The IMF has been commending to all its members the crucial importance of achieving continued success in reducing the burden imposed on the world economy by public sector deficits. We have achieved considerable success in that direction, which is why we have been able to reduce the level of inflation and interest rates as we have. That is the general message which has come loud and clear from the IMF. Other countries ought to listen to the same proposition.

Mr. Hal Miller: Will my right hon. and learned Friend agree that, contrary to the disappointment felt by the Opposition, the real value of pensions is still being indexed, the lie has been given to the false rumour put about during the Birmingham, Northfield by-election that council house rents would increase by about £2 a week, that inflation is coming down, that interest rates are coming down and that the wide welcome for his statement on this side of the House will be reflected in manufacturing industry? The Government have recognised the important principle of the cost competitiveness of our industry.

Sir Geoffrey Howe: I am grateful to my hon. Friend, particularly for reminding me of the gap between the untruth that council house rents were likely to go up by £2 a week—I know not where that came from—and the reality of what I have told the House, which is that the increase in rents, on which consultation will take place, will be 85p a week, representing no real increase.

Mr. Shore: The Chancellor still has to answer the question that I put to him about competitiveness, and it is of great importance. What change, resulting from the national reduction in the national insurance surcharge, does he expect in Britain's international competitiveness and what will the figure be, bearing in mind that it was minus 36 immediately before he made his statement? We


are glad to hear that he is not engaged in warfare against the unemployed, but the best demonstration that he could give of that assertion is a clear and unequivocal pledge to restore the 5 per cent. that was taken away from the unemployed two years ago. It will not do for the right hon. and learned Gentleman to say that the Government have not thought about it and that it is inappropriate to give an answer. He has just made a statement about the uprating of pensions. Why cannot he do the same for the unemployed?

Sir Geoffrey Howe: I have said nothing about the uprating of pensions. I have told the right hon. Gentleman and the House that decisions about that will be announced at the time of my Budget.
In relation to the other matter about which the right hon. Gentleman asks, I shall go over the figures again. The changes in the national insurance contribution, the national insurance surcharge rates and the earnings limits that I have announced will save all employers £686 million in 1983–84, £450 million for the private sector, taking account of the effect of the rise in earnings between the two years. For all employers, after taking account of the reduction in contracted-out rebate announced in March this year, the total payments would have been about £12·8 billion. They will now be £12·1 billion. That represents a reduction of 5½ per cent. and therefore makes a significant contribution to the competitiveness of British industry. I reiterate that nothing can make as large a contribution to competitiveness as further success in achieving pay moderation. One day I hope to get that proposition endorsed by the Opposition.

Orders of the Day — Debate on the Address

[FOURTH DAY]

Order read for resuming adjourned debate on Question [3 November],

That an humble Address be presented to Her Majesty, as follows:
Most Gracious Sovereign,
We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament—[Sir John Eden.].

Question again proposed.

Orders of the Day — Welfare State

The Secretary of State for Social Services (Mr. Norman Fowler): I welcome the opportunity of this debate to set out again what the Government are doing in the fields of health, personal social services and social security, and to repeat our commitment to the development of the social service system, in particular the National Health Service. That commitment we have fulfilled and will continue to fulfil.
I should like first, however, to put the debate into context. That context as been provided earlier today in the statement by my right hon. and learned Friend, the Chancellor of the Exchequer. His announcement of the Government's decisions on next year's public spending plans demonstrated the essential connection between economic policy and the development of our social services. It is simply no good the Opposition declaring, as appears to be their policy, that they would increase spending on health and social security by anything between £10 billion and £20 billion. That would have intolerable implications for taxation, inflation and for the economy as a whole.
The social services and the Welfare State cannot be ring-fenced from the rest of the economy. Steadily improving services can be sustained only by steady improvements in industrial performance and competitiveness. In other words, to abandon the fight against inflation would hit first those who are most in need, particularly those on low and fixed incomes.
That is why the Government's achievement of the lowest inflation rate for over 10 years has important social implications as well. Between 1974 and 1979 prices rose in this country by 110 per cent. This Government have now brought inflation down to around 7 per cent. and the prospect is that over the coming months inflation will drop even further. That is vital to industry and therefore to social services policy generally because it is only with industrial recovery tha we can look ahead to developing social services.
It is for the same reason—that of helping industry and thereby the wealth-creating process—that the Chancellor's announcement of the reduction in the national insurance surcharge is also so welcome. The reduction in inflation,


the reduction in interest rates, the reduction now in the national insurance surcharge, are of profound importance for the development of social services in this country.
The Government's approach to social services has four main principles. First is our strategy to create the climate for industrial recovery. That is the foundation of our approach. It is only from the wealth that industry provides that the resources for the Welfare State can be created.
Second, we want to ensure that those most in need also benefit from the process of industrial recovery, while at the same time we have done our utmost to protect those people during the present recession. Third, we are determined to secure better value for money by increasing efficiency and concentrating resources on care and treatment while also reducing the administrative bureaucracy by simplifying and streamlining procedures.
Finally, we want to see partnership between public and private in the areas of health and social services generally. We believe that it would be quite wrong for any Government to turn their back on the contribution that can be made, and is being made, by voluntary organisations in this country and also by the private sector. One of the most damaging and irrelevant policies of the Labour Party is its vendetta against the private sector. The aim should not be to destroy the private sector or to attack the voluntary organisations. The aim should be to try to harness every resource in our community to face not only what are the problems of today but what we should also recognise will be the continuing problems of tomorrow.
I wish to look first at the record of this Government and the facts of the position, not the generalised assertions. I start with health. In 1978–79 National Health Service expenditure in Great Britain was £7¾ billion. This year it is £14½ billion—almost double that amount. Expenditure has grown about 16 per cent. faster than the retail price index. Much of this extra money has gone into increased pay for staff and shorter working hours for nurses.
Resources for the Health Service itself have also grown substantially. I estimate that, with the fall in inflation this year, the scope for real growth in services to patients will be 5½ per cent. or more compared with 1978–79.

Mr. Alexander W. Lyon: The Secretary of State constantly makes this argument. Yet all those who go round our hospitals, as I did last week, see clearly that it is lack of financial resources that is squeezing staff and capital expenditure. Cannot the right hon. Gentleman see that, in a demand-led service like the Health Service, a mere 5 per cent. is actually cutting back on services because demand is growing at a far greater rate?

Mr. Fowler: The hon. Gentleman has made two points, first about growth and, secondly, about capital expenditure. On capital expenditure, it was his Government who presided over the biggest cut in such expenditure that the Health Service has known over the past decade. It was a cut of about 25 per cent. The hon. Gentleman was probably, I think, at that stage, still a member of the Government.
As for growth in the Health Service, the figures are those that I have set out. We have increased expenditure from £7¾ billion to £14¾ billion at a time of the worst recession the world has known. I would have thought that

Opposition Members would have found this pleasing. Self-evidently, that does not represent a cut in the Health Service. It represents a shift of priorities towards the Health Service in spite of the recession.
As a result, expenditure on health has increased as a proportion of GDP and it has also risen as a proportion of public expenditure, from 11·8 per cent. to 12·6 per cent. So, already, the figures show how absurd is the argument that we are seeking to cut the National Health Service.

Mr. Mike Thomas: Is it not the case nevertheless, that we still find situations arising in Great Ormond Street and elsewhere that should not arise—

Mr. William Hamilton: And the Royal Marsden clinic.

Mr. Thomas: —I agree that the Royal Marsden breast screening clinic is another classic example. We still find, on the capital front, despite the Prime Minister's injunction to the Health Service last week, that health centres are not being built, orders are not being placed, wards are not being opened and capital construction is not being entered upon by regional health authorities. Such construction is frozen because the authorities cannot face the revenue consequences of the capital expenditure.

Mr. Fowler: The letter that we sent to health authorities made it clear that what we planned was not a moratorium on capital spending. What we told them was that it was no use planning for capital spending unless they were sure of the revenue consequences that followed. It was designed to avoid the kind of situation that the hon. Gentleman has put forward.
With regard to Great Ormond Street, I have seen the chairman of the special health authority, and I hope that we shall have something further to say later this month when we have received the report on Great Ormond Street. The hon. Gentleman has been doing the social services job, if that is the job he is doing for the SDP, for long enough to understand that there will always be problems in the Health Service. That does not invalidate what I am saying, which is that the Government are devoting extra resources to the health services, not fewer.

Mrs. Elaine Kellett-Bowman: I am keen on Great Ormond Street hospital, having had a son whose life was saved there. However, does my right hon. Friend accept that those of us from the North-West are grateful to him and to his colleagues for redressing the wrongs of decades in hospital provision? In Lancaster we have a good hospital programme, and we are grateful that, for the first time, the under-resourced North-West is getting a fair crack of the whip.

Mr. Fowler: My hon. Friend makes the good point that, despite the recession, the Government have continued with the resource allocation working party policy, which I understand is supported by the Labour Party. We are trying to bring more resources to areas such as those represented by my hon. Friend, which have been under-resourced for many years.

Mrs. Gwyneth Dunwoody: Will the right hon. Gentleman confirm that Merseyside, which is one of the areas of greatest need, will have a deficit next year?

Mr. Fowler: As I understand it, there is not a cut on Merseyside, but there is in Liverpool, where the population is dropping. That is one of the integral parts of the policy.
I turn from what we have achieved to our decisions for next year, which may be of interest to the hon. Member for Crewe (Mrs. Dunwoody). As the Chancellor announced earlier, we have increased provision for the NHS in England by an extra £80 million above the total we had already planned. That includes £40 million to continue into 1983–84 the Government's contribution to the cost of our June pay offer. In other words, and contrary to the fears expressed by some Opposition Members, we shall not be expecting the health authorities to pick up the bill for that amount. The total cash for health authorities' current expenditure will be 6 per cent. above that provided in 1982–83.
As the House will know, health authorities already have a target to expand services by ½per cent. a year by improving efficiency. The cash provision now agreed for next year will permit further real growth. Just how much will, of course, depend on pay and price movements.
When I reported the position of NHS pay to the House on 18 October I said that discussions were continuing with the Royal College of Nursing and other professional bodies, and that I would report further developments to the House. Those discussions are continuing, and recently my officials have had talks with the representatives of the National Health Service unions affiliated to the TUC. Those talks are also continuing. I shall report any developments to the House at the first possible opportunity.

Mr. Reg Race (Wood Greed): Paragraph 2.24 of the Chancellor's statement says:
the Government already agreed to increase the provision in last year's plans to cover part of the cost in 1983–84 of the pay offers made this year to NHS staff.
Can I take it that the Chancellor means that next year health authorities will still have to fund one third of this year's pay offer from the Government?

Mr. Fowler: The statement referred to the knock-on effect on the Contingency Fund moneys made available in June—the £40 million that the Government made available in the June pay offer. The Health Service expressed the fear that that would be for one year only. The Chancellor's statement confirms that that is not the case. The knock-on effect will continue into next year, and the Chancellor will continue to provide the money for it.
In addition to the new resources going to health authorities, we propose to use over £20 million for central initiatives to support new pilot schemes to benefit particular services where we are determined to raise standards and which will benefit most from this approach. I shall be announcing details of the projects that I have in mind over the next few months, but I can give the House an outline of a number of the projects that we shall be financing.
Firstly, there is the care of elderly people with psychiatric disorder. Even excluding mild dementia, surveys suggest that about half a million people in Britain suffer from moderate or severe dementia. Because of the still growing number of people over the age of 75, this could rise to perhaps 550,000 by 1991. It is important to

have co-ordinated provision to help not only the people themselves but their families who are often looking after them at home.
I want to achieve demonstration districts, which will develop good practice in care of the elderly with psychiatric disorder and act as a demonstration of good practice. My Department is therefore preparing plans on this in conjunction with the health advisory service, and we shall be discussing the whole question with health and local authorities. We recognise that initial extra money from the centre will be needed to get things moving, and each demonstration district would be expected to show home care, day care and residential care working effectively together. Such a district would be a centre for information and for training of staff in its region.
Second, I attach particular importance to getting mentally handicapped children out of the large mental handicap hospitals. Large hospitals are not the right place for those children and although a great deal of progress has been made in reducing the numbers in hospital—I pay tribute to that—there is still some way to go. If we simply leave matters to the process of time alone the children will certainly disappear because they will become adults, but their circumstances would not in any way be changed for the better.
We have in mind to give help to those authorities that have special problems—very often not of their own making—in creating suitable provision. For example, there are concentrations of children in some areas simply because in the past hospital facilities which were then thought suitable were provided in those areas. We shall be looking for imaginative initiatives which break out of this situation in the interests of the child, and we recognise that this will need additional funding to make progress.

Mr. John Hannam: Does my right hon. Friend accept that much of the progress made in recent years has been due to the successful joint funding schemes developed between local authorities and regional health authorities, and that these are in some danger because of the provisions for the tapering off of these schemes in the future? Will my right hon. Friend look at the problem to see what can be done to help local authorities to maintain many of the good existing provisions that have been made?

Mr. Fowler: I shall come to that point, as I shall have something to say about both the legislative and the resource implications.
Thirdly, some of the money will be used for the further development of community-based activities for young people who offend or are at risk of doing so—intermediate treatment as it is called, although that is a title that I hope we can improve. In particular, we should aim to develop more intensive programmes—such as workshop schemes—especially designed for those children who would otherwise go to borstal or detention centre. These schemes must have the confidence of the courts and to be really effective there must also be good liaison in the planning and provision of services between the social service departments, the probation service, the police, voluntary bodies, education departments and magistrates.
The initiative that we have in mind would help those authorities who wish to develop intermediate treatment facilities more quickly than they are now doing. Eventually, resources will be released as unneeded residential accommodation is withdrawn, but there are


transitional problems. We shall be discussing with local authorities and others exactly how the scheme will work, but we have in mind specific grants to local bodies to develop intermediate treatment programmes, especially those intended as alternatives to custody. In the first full year we would hope that up to 1,500 young people would benefit from that approach.
Among other areas likely to benefit from the additional money are primary health care in inner cities and support for work with pre-school children. I shall make statements on both matters in due course. We will also be able to continue the useful scheme for encouraging voluntary activities within the health and personal social services by unemployed people. I also hope that extra money will enable us to make a further real increase in joint finance. I shall have more to say on that in a moment.
This Government have funded and will continue to fund expansion in the Health Service. No amount of argument can alter that fact. But we have also added a more general drive for improved efficiency inside the Health Service. All regions have been given efficiency targets and with a service of such importance to patients and with a spending of £14½ billion of taxpayers' money, it is surely common sense to encourage the maximum efficiency in the use of resources. The new regional review system will also help to ensure that those resources go as directly as possible into patient care.

Mr. Michael Morris: Is my right hon. Friend aware of the extraordinary document produced by Oxford district health authority, which calls for a withdrawal of basic facilities from the National Health Service? After the helpful suggestions in my right hon. Friend's positive statement, will he now call in the chairman and other Labour members of that authority, who seem to believe that the National Health Service should be undone?

Mr Fowler: My hon. and learned Friend the Minister for Health has already seen the health authority chairman, although the document was at first the work only of the regional medical officer. The figures used in that document are not an accurate basis for action and the regional health authority does not intend to use it as such.

Mrs. Dunwoody: Is the Secretary of State suggesting that the figures in that document were not based on the simple assumption that the health authority will not be able to provide the same services as it does at present? That is my understanding of Oxford's position.

Mr. Fowler: I suggest that the authority had the wrong figures, which is why we asked the regional health authority to obtain the correct ones.
The National Health Service is financed by a combination of taxation, national insurance and charges. In all, we are now planning to spend about £15½ billion on health services in Great Britain, an increase of about 6¾ per cent. on this year's cash provision. The lion's share obviously comes from taxation. A further 11 per cent. comes from the health part of national insurance contributions, while about 3 per cent. comes from charges. Nevertheless, charges raise about £450 million a year for the National Health Service. This year there were real increases in some of those charges. Next year we shall increase charges only in line with costs.
The commitment of financial resources is clearly an important and major part of ensuring that services are appropriate to the needs of the individual. But those needs often do not submit to the tidy administrative boundaries between services. The statutory authorities must act in partnership with each other. As my hon. Friend the Member for Exeter (Mr. Hannam) said, there must be partnership between the National Health Service and local authorities, but there must also be partnership between those bodies and the private and voluntary organisations. The health Bill that we hope to introduce soon in another place contains a range of measures that will help the partnership to develop.
First, the Bill will deal with the vital area of joint financing between health and local authorities, that has played an important part in developing services. The Government have increased spending on joint finance in real terms by about 35 per cent. during the past four years, but in several respects the existing rules for joint finance have not provided the necessary flexibility. They are not doing enough quickly enough. There are still people in long-stay hospitals who need not be there if more community care were available. That is why we published our consultative document "Care in the Community" and why we now intend to make changes in the rules so that, for example, health authorities can transfer resources with patients for as long as necessary. The Bill will enable health authorities to contribute to housing and education services. More resources will go to joint finance. My hon. and learned Friend in his winding-up remarks will say something about that and the wider issue of personal social services.
Another important part of the provisions in the Bill will concern arrangements for maintaining standards in residential homes for old people, for the mentally disordered and for the disabled. Many of those services are provided by the private sector and by the voluntary sector. Without their help we would face dire problems and we welcome the development that has taken place. But, at the same time, we also wish to be clear that standards in those residential homes are adequate. The Bill will, therefore, contain provisions for ensuring that, while at the same time not trying to limit the growth of that invaluable provision.
The decisions on health spending, the measures already taken to improve efficiency and to reduce bureaucracy and the proposals in the new health Bill that we shall be introducing to encourage collaboration and partnership form a coherent strategy to maintain and improve services. They build on a solid record of achievement and they also give the lie to those who say that we are out to dismantle the National Health Service or, even more extravagantly, the Welfare State. The charge is bogus, it can be seen to be bogus and only the most gullible can be taken in by the string of prejudices put forward by the Leader of the Opposition as his party's contribution to the debate on health when he opened the debate on the Loyal Address.
The right hon. Gentleman said that his party will remove all pay beds from National Health Service hospitals and so turn its back on about £50 million of income and an estimated £25 million gain to the NHS. His party will end the compromise introduced by Nye Bevan for consultants working both in the National Health Service and the private sector, which is smack against the overwhelming wish of the medical profession and against the interests of the patient. His party claims that it will


abolish all health charges at a total cost of about £450 million. It will commit itself to 3 per cent. real growth in the National Health Service a year in addition to the extra billions it promises for the social security system.
The only sensible question to ask about such a programme is whether anyone seriously believes it, or whether the true position is that the Labour Party is indulging in its familiar tactics of raising expectations which, in its heart of hearts, it knows will never be carried out. If anyone wishes proof of that, he need only go back to the Labour Government to see how they fared.
In 1976, the year of the visitation of the IMF, cuts had to be made in the National Health Service capital spending—the biggest cuts made by any Government in capital spending during the past decade. If anyone thinks that it is new to predict the demise of the National Health Service, they should remind themselves of what Mr. Bernard Dix of the National Union of Public Employees had to say about the Labour Government's treatment of the National Health Service in September 1977 at the TUC conference. Mr. Dix said:
We are faced with a situation where the National Health Service is experiencing a long period of savage cuts which is going to reduce it to a shadow of its former self and Nye Bevan must be crying in his grave now to see what is happening to the National Health Service.
That was the reaction of the Health Service unions to the policies of a party which now poses as the only defender of the Health Service.
The fact is that the last Government had raised expectations which simply could not be fulfilled. The Labour Party is doing exactly the same today. Its policy on health is shallow, dogmatic, and simply cannot be taken seriously. The provision for the social security programme for 1983–84 amounts to over £34 billion, including about £15 billion for retirement pensions. The total programme is an increase of £606 million over the amount previously allocated. The increase takes account of revised assumptions about the numbers of people likely to receive benefits and movements in prices. It also reflects the other points made in the autumn statement earlier today by the Chancellor.
The size of expenditure on social security is now self-evidently enormous. It is by far the largest single public expenditure programme of all. It accounts for over 28 per cent. of the Government's planned public expenditure total. The uprating of benefits later this month will alone cost some £3 billion. Again, whatever the allegations of the Opposition, the facts are that the Government are continuing and will continue to meet the needs of those who rely on social security benefits. The increasing spending on social security makes that plain for everyone to see.

Mr. David Ennals: As the increase in real terms for the pensioner between 1974 and 1979 was 20 per cent., what is the right hon. Gentleman's estimate of the real terms increase for the pensioner between 1979 and 1983, particularly in view of the announcement that there is to be a cutback in November 1983 because of this year's overpayment?

Mr. Fowler: I was coming to that point. However, before I do, perhaps I may remind the right hon. Gentleman of what also happened between 1974 and 1979. Between those years, inflation went up by 110 per cent.

Pensioners with savings of, say, £5,000, saw the real value of those savings halved under the Labour Government. That was the result of the right hon. Gentleman's policies.
The Government are committed to maintaining the value of pensions and the related long-term benefits. Clearly, each year's uprating of benefits is based on a forecast, made at the time of the Budget, of the increase in prices between the previous November and the following November. Inevitably, the forecast can be too high or too low, so adjustments in the following year may be needed. That is just what is happening in this month's uprating, when last year's shortfall of 2 per cent. is being made good. Some adjustments are part of the process of maintaining the value of benefits over a period.
During this November, benefits will be uprated by 11 per cent. That figure is made up of the unintended 2 per cent. shortfall in the 1981 uprating and the 9 per cent. forecast of price increases between November 1981 and November 1982 made at the time of the last Budget. In fact, as we all now know, inflation has risen by less than the estimate. We shall not know by exactly how much less until the middle of December, but the position is that the rise in prices between November 1981 and November 1981 will probably be somewhere between 2½ and even 3 per cent. less than the 9 per cent. that was originally estimated. Obviously, that has no effect upon the uprating later this month which will go ahead, as planned, at 11 per cent. However, as my right hon. and learned Friend said in his statement, when we settle the amount of the 1983 uprating of benefits, we shall need to have regard to the fact that this year the actual rise in prices will be less than the original forecast rise in prices. The decisions on what the 1983 uprating should be will be taken, as usual, at the time of the next Budget.

Mr. J. W. Rooker: I should like to raise a technical point in that connection, so that the House may understand what will happen. The last time that this situation occurred was in the so-called overprovision in November 1980, when the clawback of 1 per cent. took place in 1981, for which a Bill had to be put through the House. Will the same situation arise in 1983?

Mr. Fowler: It would have to be the same. If any adjustment were made, it would require primary legislation to do that. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) probably knows the answer to his question very well.
It is important that the hon. Gentleman and the House understands the position. Pensioners have been fully price protected over the lifetime of this Government. The effect of this month's uprating is to give them an increase over and above price protection. What will be in question when we consider the details of next year's uprating is the extent to which those gains will continue after November 1983 and what adjustments will be made at that time. However, as I say, final decisions on next year's uprating will not be made until the time of the Budget, and in making that decision we shall have to decide the relative priorities to be given to any adjustment for pensions and other social security payments and the impovements that many on both sides of the House have pressed on the Government. A choice has to be made, and I believe that it is right to make that choice at one and the same time.
We have sought to protect the most needy, and we have done that in spite of the worst recession that the world has


experienced since the end of the Second World War. The value of supplementary benefit— the safety net of the Welfare State—has been fully protected against inflation. We have also improved the help we are providing towards fuel costs. We are now spending over £300 million a year on help with fuel costs for families on supplementary benefit and family income supplement—far more in real terms than the previous Administration.
Mobility allowance has been increased by more than the rise in prices, and is no longer subject to tax. The earnings limit for invalid care allowance and the therapeutic earnings rule for invalidity benefit is being increased from this November. Also from this November, the supplementary benefit disregard is being raised from £2,000 to £2,500.
I hope that at the time of the next uprating it will be possible to announce further changes, but I must frankly tell the House that choices will have to be made. It is simply not possible to do everything. We will have to decide what, for example, is the relative priority between making further changes in social security, which many on both sides of the House would want, and adjusting pension and social security rates to take account of the payment over and above inflation which will be made later this month.
The Opposition talk of the destruction of the Welfare State, but the fact is that this Government are spending 44 per cent. of their public spending programme on the Health Service, on personal social services, and on social security expenditure. That hardly seems the action of a Government intent on destroying the Welfare State. The Opposition always ignore the links between the Welfare State and the shape and the state of the economy as a whole. In July 1975, the Labour Government presented a White Paper euphemistically called "The Attack on Inflation". At that stage inflation was running at 26½ per cent. The White Paper declared:
This must not go on. Failure to control inflation would mean massive and indiscriminate cuts in public expenditure with crippling damage to the social services. Success in controlling inflation is the best guarantee against this.
The House wants to know whether the hon. Member for Crewe and the hon. Member for Pontrypridd (Mr. John) agree with what their Government then said, because if they do the policies that they are advocating are wholly inconsistent with that claim. Their solution rests upon more and more public spending, but the real charge against them remains that they know that they are making promises that they could not and would not fulfil. Anyone who thinks otherwise has only to go back to the Labour Government and the report of the TUC-Labour Party liaison committee in 1976 which said:
In theory we could let public expenditure go up and try to pay for it by big increases in taxation but this would cut the pay packet or raise prices and put intolerable strains on our policy for beating inflation".
Those words were true, but that is the truth upon which Labour Members are turning their backs.
The Government are not prepared to make promises which we do not believe can be fulfilled. We shall continue to work to restore the economy so that at the same time we can develop the National Health Service, develop personal social services and make improvements in our

social security system. That is already the achievement of the Government. The attack of the Opposition is a fraud and a sham.

Mrs. Elaine Kellett-Bowman: On a point of order, Mr. Deputy Speaker. Is it in order that there should be only 10 Labour Members present?

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The hon. Lady knows much better than that.

Mr. Brynmor John: We are glad to hear from the hon. Member for Lancaster (Mrs. Kellett-Bowman) on one of her rare returns to Britain from her manifold public duties.
I can tell from the sound, if not the presence, of the Minister for Health that he has concluded his day's negotiations. Now that he is here, I hope that he will listen to the debate because we shall want some constructive news from him at the end of the debate.
First, may I lodge an objection to the fact that the Secretary of State should choose to make the statement on social security which is implicit in today's reply to a planted question from the hon. Member for Orpington (Mr. Stanbrook). We shall want a debate upon the national insurance implications at the earliest opportunity, by which I do not mean a debate on the order which will raise contributions.
This is a debate on the Welfare State and I intend to deal with several facets of that. However, we cannot ignore the fact that there have been some important statements today. The first of those was the view of the Chancellor and that of the Secretary of State for Social Services regarding the uprating in November 1983. The Chancellor, relying on the fact that nobody had gone to the Vote Office, said that he could not possibly make any predictions about what uprating will mean. If one turns to paragraph 2.25 of the document published by the Chancellor, which is in our possession, he will see that the assumption for inflation on which the uprating will take place in November 1983 is 5 per cent. Let us assume for the moment that that is one thing that the Chancellor happens to get right and that there will be a 5 per cent. uprating in November 1983 and a clawback of the overshoot. Does that mean that the pensioner will then get a rise of 2 per cent. or 2½ per cent. and not the 5 per cent. of inflation? It certainly goes much further than the right hon. and learned Gentleman sought to imply. He said that the Government would take such things into account. However, if the Minister for Health, who has just joined us, will take a little time in his busy day to read paragraph 2.25 he will see that an adjustment will be made. There is no question about that. An adjustment will be made. Therefore, the hon. and learned Gentleman can tell us whether a total or a partial clawback will be made. What will happen?

The Minister for Health (Mr. Kenneth Clarke): Wait and see.

Mr. John: We shall wait and see, but without much expectation.
What did the Secretary of State for Social Services say at his party conference? In a rare moment of candour he said that he was not in politics to preside over the destruction of the Welfare State or the National Health Service. Nobody but the Prime Minister in the Government would be allowed to preside over anything,


so that was hardly enlightening. However, his remark was in response to a double threat in the Think Tank's report as it was reported in The Economist, namely, that the Welfare State would be subject to radical changes and that benefits would be cut free from indexation —from the tie with the cost of living.
Since the Minister went out of his way to deny that he was other than wholly committed to the National Health Service, will he, through the Minister who will reply, go out of his way to deny that he is considering the de-indexation of benefits to all pensioners? I am bound to tell him that the clawback provisions in the measures outlined this afternoon do not fill us with much confidence.
On 24 February 1981 when the last clawback took place the Minister for Social Security said:
We do so reluctantly this year because of the prevailing economic position".—[Official Report, 24 February 1981; Vol. 999, c. 824.]
I remind the right hon. Gentleman that the Chancellor seemed to be hinting—indeed, it has been confidently reported—that he would have about £3 billion to give away next April. Are the Government giving us to understand that they must claw back from the poorest sections of our community a maximum of —260 million in 1983–84 because they cannot afford otherwise, when there is £3,000 million spare on their Budget judgment which can be given away? Is that a symbol of the priority which the Government give to the protection of the poorest in our community? We shall fight that tooth and claw— having considered the matter, we shall fight it tooth and clawback—when it comes before the House.
We should be clear why the Welfare State came into existence. It came about because the community recoiled from the poverty and misery of the 1930s, when the fear of falling ill, of becoming jobless or of getting old, and the consequences, horrified many people and made them determined that such a situation should not be repeated. That was the genesis of the Welfare State. It was an attack on two of Beveridge's five giants—disease and want. The system envisaged the nation as an extended family from birth to death. There was a belief that those who were able should help those who were at risk to remove the fear and hardship which illness, joblessness and old age brought about.
Although the Prime Minister declared in 1977 that the Conservative Party was the party of the family, it is a party which also practises the policy of "beggar my neighbour". What the Conservatives did at the general election was to set worker against worker and all people against the unemployed; to set taxpayer against welfare recipient—the Under-Secretary of State for Trade was able to show that as a Back Bencher in his bogus pursuit of welfare recipients—and the tenant against the house owner.
By splitting the country into factions the Conservative Party devalued the whole concept of welfare. In Government that process has continued. This afternoon the right hon. Gentleman suggested to the House that the highest aspiration of family provision is private insurance, private medical provison and private education. In the guise of relieving pressure on the services, the Government have encouraged the affluent, the articulate and the vocal to buy privilege rather than demand better communal provision.
Having first done that, the Government's appalling economic record has increased tremendously the number

of people who have to rely on the Welfare State. We do not need to rehearse the increased queues and the increased number of claims which unemployment has brought about at social security offices.
At the same time, the Government's enmity towards all those in public employment has meant that in social security this explosion of demand has landed on a work force which has been cut by 2 per cent. It is no wonder, therefore, that reports coming to me from all over the country make the pattern clear, namely, that shortage of staff is making the service a nightmare for employees and claimants alike, and the breakdown of the service in Birmingham, which covers the right hon. Gentleman's own constituency, is merely a sign of what is to come unless the Government take action on staffing to meet the exceptional needs brought about by their economic policies.
I ask the Secretary of State to intervene personally in this dispute now so that something may be done for the poor people of Birmingham and for the overburdened staff of the social security offices.
Even in the collection of Clouseaus who form the Cabinet, the Secretary of State has achieved a unique double. He has managed to have large sections of his health empire and of his social security empire in revolt against him at the same time.
People faced with personal hardship and misfortune do not find Professor Friedman and Professor Hayek very good substitutes for Beveridge. Therefore, we acknowledge that the Secretary of State has increased in absolute terms the amount of money that he has spent on the Welfare State, although it must be said that extra demand has brought about most of it. However, the real increase in the Health Service is only half of what was achieved in the last three years of the Labour Government. The gravamen of the charge against the right hon. Gentleman is that what he has spent on the Welfare State does not match up to the needs of the moment. That is what is important, and not some arithmetical formula.
Naturally, we are all anxious to hear from the Minister for Health about the pay talks, and I do not propose to deal with them in any detail. But I want to draw attention to the points arising out of the pay talks.
The Secretary of State knows that whatever happens in these talks he will have in the hospital services for the immediate future an embittered and demoralised work force. Though there will be no conscious acts to lessen the quality of the service, there is bound to be some diminution in quality. However good medical technology becomes, the quality of the service depends vitally on the morale of those working in the service at all levels. Therefore the Secretary of State, or whoever is to deal with this problem in the projected reshuffle, will have to make the Health Service workers, who are indignant about their treatment, and the public, who are almost equally indignant about the treatment meted out to the workers, confident once again of their place in society and confident again of the value of the services that they provide. We hope to see an end once and of all to Government ego trips at the expense of some of the lowest paid workers in Britain.
Having built up morale, there is a need for the proper financing of the service. As I understand it, next year there will be a cut of more than £142 million in the Health Service. The right hon. Gentleman has boasted several


times of real growth, but he has not achieved the levels of real growth that were achieved in the last three years of the Labour Government—[Interruption.]

Mr. Fowler: Will the hon. Gentleman give way?

Mr. John: I shall give way to the Secretary of State after I have given yet another lesson in manners to the Secretary of State for Wales. He was perhaps at his best as Opposition spokesman on Welsh matters, because he had an image which was rough, tough and lacking in manners. His trouble is that he has never made the transition from being that sort of macho Opposition spokesman to being a man who represents the Principality. I hope that he will learn rather better manners and learn how to behave like a Minister.

Mr. Fowler: Perhaps I might intervene in this private quarrel. From where does the hon. Gentleman get this figure of a £142 million reduction? From where precisely does that figure come? Did not the hon. Gentleman hear what my right hon. and learned Friend the Chancellor of the Exchequer said, and the £80 million increase which he announced?

Mr. John: Just because the Chancellor of the Exchequer mumbles, it does not follow automatically that I do not hear what he says. The answer is that the figure comes from Government figures. If they are wrong, the Government should apologise to the House.

Mr. Fowler: rose—

Mr. John: I am not proposing to give way further to the right hon. Gentleman.
What the proper financing of the Health Service does not mean is the raising of prescription charges as cruelly as has been done in the last couple of years. The right hon. Gentleman said that for the next year charges would not rise by any more than prices rose. In the 1981 White Paper on expenditure, exactly the same promise was made. We were told that prices would be matched exactly by charges. But since this Government came to power, prescription charges have risen from 20p per item to a figure now of £1·30 per item—more than six times as much and four and a half times ahead of prices. It is no wonder that cheaper substitutes are being bought from chemists in preference and that people cross items off prescriptions because of the total cost. Optical charges have been increased by 17 per cent. this year in real terms—the second time that they have been raised under this Government. Dental charges have been raised four times during the course of this Government, and that has been a real rise, allowing for the cost of living increase, of 105 per cent.
The Government and their supporters are fond of prating to the House that they will tell the country the truth. They would be better believed if the gulf between what the Government say in their White Papers and what they do in practice were not so incredibly wide.
The next need is for the Government to make the Health Service as equal and as integrated as possible. The reality is different. The Black report on inequalities in the Health Service has been with them for two years and more. They have done nothing about it. In the inequalities there is reflected in some areas the chronic absence of primary care in some large cities. The Secretary of State referred to certain plans which were projected for the following year.

But the Acheson report, which made detailed proposals on that facet of the Welfare State, was in the Government's hands about a year and a half ago. Nothing has been done about that, either.
That is not to say that the Government are entirely supine. The Royal Commission on health recommended that to improve primary and hospital care, family practitioner committees should be integrated into the Health Service. The Government have acted upon that. They have gone contrary to the recommendation of the Royal Commission and intend to hive them off completely.
Finally, the Government have sanctioned not only the obvious hospital closures but those of some hospitals of proved excellence, whose closure will mean harm both nationally and internationally. I refer, for example, to the closure of St. Mark's in the East End which has a reputation of world renown in gastro-enterology. I refer to the early scan unit of the Royal Marsden hospital, and I know that the Minister has now brought that decision into his own hands. But I hope that he will bear in mind that breast cancer is the largest killer of women over 35 and that the quality of service at this hospital is proved and is outstanding. It would be a scandal if it were closed.
I remind the right hon. Gentleman that although it may be unglamorous in this world of heart transplants and limb replacements, Tadworth hospital, which cares for terminally ill children, is scheduled for closure. Its closure would also be a mean and petty economy. Is it any wonder, therefore, that both the acts and the omissions of the Government in the NHS has caused people to dread becoming ill?

Mr. Peter Bottomley: The hon. Gentleman referred earlier to a reduction of £142 million. Just for the sake of the record, would it be possible for him or his colleague to confirm that the only place where £142 million can be found is in the figure for increased spending on health and social services on page 21 of the autumn statement?

Mr. John: My hon. Friend the Member for Crewe (Mrs. Dunwoody) will deal with that in more detail. The hon. Member for Newcastle upon Tyne, East (Mr. Thomas) may laugh. His laughter is welcome as it comes from the spokesman of a party whose unrelieved gloom with regard to opinion polls gives little cause for laughter. It would be infinitely preferable if he made a constructive contribution to the debate. Nevertheless, I understand that the £142 million is a cut.
I shall now deal with the retired—a category that spreads from those who enjoy good health to the increasing number of people who are old and frail. Their pensions should be adequate. The right hon. Gentleman boasted about how he has protected those pensions but he omits to mention that by cutting the alternative link with earnings, the pension of a married couple is about £3 a week less and a single person's £1·85 less than it would have been had the previous formula obtained. Not only is money at stake. The retired are asking not merely to stand still but to share in any increase in wealth that is created by society. That would involve linkage with the average industrial wage. What thought are the Government giving to that matter?
The retired also have special needs. Fuel is a high priority. Many pensioners dread the onset of winter. High fuel bills and high standing charges are a plague to them.


In many cases, fuel costs have been raised at the Government's behest. One need only recall the Government's diktat to the gas boards to raise costs by a given percentage to know that that is true. Those charges are not adequately reflected in pension increases.
It was remarked earlier that the cost of living index does not cover the cost of living for the poorer sections of our community. It is a rough average. For example, the greatest reduction in inflation will be caused by the reduction in mortgage interest payments. That is of little or no interest to pensioners and the majority of sick or disabled persons. For pensioners, a cold winter means a stark choice between hypothermia or doing without.
There is only one adjective to describe the Government's special help scheme last winter — woeful. When it eventually crept into action, only half the people who needed it were eligible to claim benefit. Moreover, claiming was a complex and unfair process and the advertisements were hopelessly inadequate. Of those who were entitled to claim benefit, only 6 per cent. did so. What a farce it was. One is reminded of the mountain labouring to bring forth a mouse.
The Secretary of State should be ashamed that his Department did not do better. I hope that he heeds what I have said, not only about the new fuel allowance but about the inadequacies of the scheme that he funded lest there be another cold spell this winter that catches him napping and wanting again.
Public provision is often the means by which the transition from independence to dependence is achieved with dignity—but the Government have not matched the need. There is less home help than there was. There are fewer meals on wheels than there were. Too little sheltered accommodation and too little part III accommodation is being built, either because of capital restrictions or because of what the Secretary of State and the Prime Minister fail to understand —the revenue implications of capital expenditure.
Is it any wonder, therefore, that with fewer close family ties than there once were—a circumstance we all deprecate—many people are beginning to dread growing old because of the hardships that confront them?
Social security is another great pillar of the Welfare State. I wondered whether the right hon. Gentleman would mention it. He did, but he omitted to say that he has cut £1·8 billion this year as a result of his legislation out of his Department"s annual budget. It is an annual cut so it may be cumulative. More cuts may follow. If the Secretary of State for Wales is taking an episodic interest in the matter and wishes to challenge my facts, I refer him to the Social Service Advisory Committee report.
There has been a phenomenal rise in the number of people who are dependent on the benefits of the Welfare State. Since 1979, unemployment has doubled and the number of the long-term unemployed has trebled. It is high time that the Government made the long-term unemployed eligible for long-term supplementary benefit. If there is to be a giveaway Budget on a massive scale, it would be scandalous if the Chancellor were to ignore those people who are already suffering the indignities of unemployment.
There are 4 million homes and 6½ million claimants in receipt of supplementary benefit. More than half of those are people of working age and their dependants. Unemployment is, of course, the major factor but it is time that the House cautioned itself about its attitude towards

unemployment lest it misunderstand. It is fashionable to say that the chief evil of unemployment is a man's loss of dignity. It is a major factor but the most important element of becoming employed is the sudden and catastrophic drop in income. Every week, the unemployed man sees his family plunging towards the povery line.
Lest the Secretary of State blames the world recession, the weather or Keynes for that, it is worth pointing out that the Government's abolition of earnings-related supplement has removed the cushion between employment and unemployment to the extent of £11·20 a week. Not content with that and in anticipation of taxation, the Government imposed a 5 per cent. abatement of unemployment benefit. I do not need to belabour the point. The right hon. Gentleman and the Chancellor were so shamefaced that they could not defend themselves on this matter.
People have been wrongfully deprived of the 5 per cent. abatement. It has turned out to be a fraud. They were told that when taxation was introduced the 5 per cent. would be restored. That has not happened. It should be restored. The Government should act immediately. As a proportion of average industrial earnings, unemployment benefit is now at its lowest level for 30 years. That is a measure of the misery that has been added to the plight of the unemployed.

Mr. Richard Needham: I do not want to ruin the hon. Gentleman's case as I have much sympathy with it but can he say what percentage of unemployed people received earnings-related supplement? I am sure that he will find that fewer than 20 per cent. did so.

Mr. John: That concerns the newly unemployed. It does not take into account any of those who have been unemployed for more than six months. I was arguing that the cushion that is provided in the transition from employment to unemployment has been taken away so that the fall is more catastrophic and the worry is greater to the unemployed man and his family.
Those in receipt of benefit cannot look to the new housing benefit that is about to come into operation for any relief. There must be competition in Government between the fuel allowance and the housing benefit for the "Shambles of the year" competition. Both have been utter failures. Explanatory forms have not been sent out. In Tottenham the people ran out of paper and could not afford to obtain any more on which to duplicate notices. As they warned the Government, in some areas the local authorities are not fully ready for the scheme. Some 2 million people will lose as a result of the adjustment of the tapers in that benefit. For those whose rent-free weeks are after the end of the month further losses will occur because of that factor.
All that is bad enough but it might be mitigated at any rate if the Secretary of State and the Government treated children as well as they promised in the heady days of 1977 when even the Chancellor of the Exchequer was putting down early-day motions pledging his undying commitment to the real value of child benefit.
Parents may be impoverished but I remind the Secretary of State that the number of children who are dependent on unemployed parents is over 1 million. They could have been protected if the Government had chosen to do so. Instead, in 1981, in real terms, child benefit was worth 40p per week less than in 1979. If it were to equal short-term


benefit dependency in 1979 the benefit would have to be increased by £2 a week. We should be ashamed of that treatment of children whose lives are already scarred by the experience of having unemployed parents.
Some awareness of that must have percolated through to the Prime Minister because she told the Cabinet this summer to go away and think about the family during the recess. From this "Brain of Britain" competition there have not been many results. I make to the Secretary of State a practical suggestion that is relevant as the Chancellor of the Exchequer may have about £3 billion to give away, so he says, in tax reductions, personal allowances or something like that. Because the burden of taxation has worsened for everyone under the Government, except the rich, it is a matter not of giving an extra bonus but of restoring the population to its earlier position. The question is how best to use the money that is available.
The hot tip at the moment is personal allowances. The hon. Member for Hornchurch (Mr. Squire) who is not present at the moment, asked the Treasury on 20 April 1982 for comparative figures of the effect of introducing first a 25 per cent. tax band, second of increasing personal allowances and third of increasing child benefit for a family with two children. At all levels of income child benefit is the most cost effective. At four times the national average wage the comparative figures are that net the 25 per cent. band benefits the wage earner by £1·92 and the personal allowance benefits him by £3·23. For a family with two children the child benefit could be raised by no less than £7·70. The benefit is greater at the average earnings level.
Therefore, spending in that way would have three benefits. First, it would yield much more benefit for families, even those with only one child, than personal allowances or a reduced tax band. Second, it would restore the shift of the burden of taxation, which has steadily moved against parents with children in favour of parents without children and single persons. That has occurred over a number of years. Third, it would remedy in some measure the worst cause of family poverty, which is the disgraceful treatment of children. It is about time that the Secretary of State's fine words were matched by fine deeds, otherwise he will stand condemned as the Chancellor of the Exchequer's cat's-paw, which is about as menial a task as one can hope to achieve in this Government.
When, 40 years ago, Beveridge reported it was after a long slump and at a time in the war when the United Kingdom's fortunes were not high. Yet he, and a good number of the British public, were already looking forward to the future, determined to blot out the iniquities of the past. Today we are in a bad slump again. We need hope and vision. We need the belief that the community as a community must act together to conquer the slump by fairness and compassion. Unless people turn aside from the mood of selfish nihilism that the Government have encouraged, we shall never get out of this situation. We need to look ahead, yet hardly anyone will risk taking a long view of the future. There is no optimism by anyone about anyone or anything. Only a view of the community as a family with rights and responsibilities can give us that vision. The symbol of that must be a revived Welfare State.
When looking at the Whig Benches, Disraeli once called them a row of extinct volcanoes. The team that is currently in charge of the nation's most priceless assets is more like a quintet of deserted anthills. Where there should be vision there are blinkers; where there should be humanity there is a cost-benefit mentality and selfishness; where there should be compassion, nothing but synthetic self-regard is exuded.
The Welfare State will be killed not by a single blow but by a succession of mean and petty cuts such as the ones that we have experienced in the past three and a half years. However, despite all the cynicism, the people regard the Welfare State as their heritage. It is the jewel in my party's crown. A Labour Government brought it about. Together we shall reverse the squalid happenings of the wasted years and restore to the Welfare State its rightful quality.

Sir Ian Gilmour: My right hon. Friend the Secretary of State produced some impressive figures to show that he was producing a real increase in health expenditure in the coming year. The fact that the hon. Member for Pontypridd (Mr. John) refused to give way to him on that point when he interrupted shows that he realised that he had got the figures wrong, which was confirmed by my hon. Friend the Member for Woolwich, West (Mr. Bottomley). If the hon. Gentleman looks at the autumn statement he will see that he got the £142 million the wrong way round.
My right hon. Friend said much about the increases, improvements and initiatives that he is making, which are welcome to all of us. My difficulty is that I find some problems in relating what he said to what is going on in the Oxford region. My hon. Friend the Member for Northampton, South (Mr. Morris) raised that point. My right hon. Friend said that the figures were wrong. When the document came out some alarming possibilities were raised and my hon. Friend the Under-Secretary of State delivered a sharp rebuke.
On Saturday we read in The Times that a deputy secretary in the Department, a Mr. Collier, who was speaking on behalf of my hon. and learned Friend the Minister for Health—I hope he was; otherwise he was speaking out of turn—said that
shorn of the 'way out' elements, the Oxford approach was to be strongly recommended and welcomed.
He also said that the
guts of the Oxford proposals were first class.
It is not for me to adjudicate between my hon. Friend the Under-Secretary of State and my hon. and learned Friend the Minister for Health, but both cannot be right. It is strange that a document that has caused great alarm throughout the Oxford region, and which has proposed some drastic cuts which would seriously hamper the Health Service and penalise the patients, should be welcomed by an official or a Minister in the Department of Health and Social Security. Therefore, I hope that matter will be clarified in the wind-up speech.
We all know why the Oxford region does not have enough money. It is because the funds are unfairly allocated. That did not begin under this Government. It went on under the Labour Government, too. My hon. Friends and I have made representations to Secretaries of State of both Labour and Conservative Governments. Although we have an unanswerable case, we never achieve anything. The allocation is unfair because the


Oxford region is the only region in which the population is increasing rapidly. The formula under which the Department allocates funds takes no account of what one would think was a basic matter. By the time the funds and resources come into use they are based on population figures that are two years out of date. That creates a serious penalty of about £6 billion a year on the Oxford region.
Why is this obvious injustice not remedied? It is not remedied because the present formula suits the regions in which the population is declining, and the Department is reluctant to upset all those regions. That would be understandable if the duty of the Department was merely not to upset a few regions, but that is not the duty of the Department. The duty of the Department—as it was under the Labour Government—is to see that the funds are allocated fairly. They are not allocated fairly, and that is why the Oxford document has been produced. This is an anomaly and an injustice. I trust that my hon. and learned Friend will have something useful and encouraging to say about it when he winds up. If not, neither he nor the Secretary of State will be living up to the fine and excellent words of the Prime Minister about the Health Service which were quoted by the Leader of the Opposition last week.

Mr. Ennals: The right hon. Gentleman is voicing the great concern of the Oxford region, and everyone who has read the document must share that concern. Is he aware, however, that whether the RAWP formula is right or not, every region and every health authority in the country, despite what the Secretary of State said about more money, is now working out how it is to make some of the cuts that are being forced upon it? It is not just Oxford that is concerned; it is the country. The right hon. Gentleman must know that and so must the Secretary of State.

Sir Ian Gilmour: That is not my point. My point is that the allocation discriminates unfairly against Oxford. First, I am asking for fair treatment for Oxford. Later, perhaps, we may go further.
I turn to the treatment of the unemployed. I find myself in full agreement with what has been said by the hon. Member for Pontypridd. It is astonishing that neither the Secretary of State nor the Chancellor of the Exchequer was able to say unequivocally this afternoon that the 5 per cent. was to be restored. They know perfectly well that the fact that it has not been restored is disgraceful. I can see no conceivable reason why that has not been done. Until now the general view has been that they wanted to restore it when funds were available. However, a worrying interview was given recently by the Secretary of State for Employment, shortly after I had made some remarks on the subject at Brighton, which suggested a rather different view. My right hon. Friend said that the Government could not keep remorselessly increasing benefits for those out of work. That phrase was singularly ill chosen when the benefits had in fact been decreased. The remorseless thing is that the unemployed have not been properly treated. I hope that my hon. and learned Friend will repudiate that remark.
I hope that my hon. and learned Friend will also say something about long-term supplementary benefit for the unemployed. As all who have looked into the matter agree, it is a monstrous injustice that the unemployed do not receive this benefit. My right hon. Friend the Secretary of State for Employment said that he was not sure where

the money would come from. It could come from the money raised in the taxation of unemployment benefit. Therefore, I hope that we shall hear something better than we have heard so far on both those subjects.
The treatment of the unemployed must be considered in conjunction with the bleak fact that unemployment has been rising fast and, as we learned today, will continue to do so. The Chancellor said that it will moderate a little, but I believe that he said that last year, so we cannot be too sure.
Since the debate on the Address last year, unemployment, excluding school leavers, has risen by 334,000 and vacancies by 13,000. Those figures come as no great surprise to many people. They are much as we expected last year. Indeed, I could make the same speech on unemployment as I made last year. The House need not worry, as I do not intend to do so, although I fully stand by what I said then. The Chancellor of the Exchequer and the Secretary of State for Employment, however, could scarcely do the same, so it will be interesting to hear what they have to say. Simply shifting the date of recovery ever further into the future and telling us that unemployment is a world-wide phenomenon is not an adequate response.
Although I welcome the imaginative youth training scheme and the Chancellor's announcement that £260 million more is to be spent on employment schemes, I still believe that the Government's response to the ever more serious problem of unemployment has been woefully insufficient. I say that not merely because the unemployed should be given some hope— indeed, they have the right to expect something a good deal better than that—but because, even in these circumstances, our trade performance is so outstandingly bad that it does not augur well for the unemployed in future.
Against the background of a massive fall in manufacturing output of about 16 per cent. in the past few years, it is instructive to consider what has happened to the export and import of manufactures. Taking 1975 as 100, total exports were 116 in 1980, 112 in 1981, 112 in the first quarter of 1982, 116 in the second quarter of 1982 and 109 in the third quarter of 1982. On the same basis, imports totalled 154 in 1980, 161 in 1981, 171 in the first quarter of 1982, 182 in the second quarter of 1982 and 178 in the third quarter of 1982. In other words, at a time of the deepest depression ever, our exports of manufactures have remained barely constant while imports have risen exceedingly. In the face of such figures, it is hollow to talk about increased competitiveness.
My right hon. and learned Friend the Chancellor very wisely talked about the importance of keeping wage settlements down, looking to the Opposition for support, which I hope he will receive. Certainly, settlements have been at a more realistic level lately, and we trust that that will continue.
The right hon. Member for Stepney and Poplar (Mr. Shore) said that we are 36 per cent. less competitive than we were in 1978. Others have said that the figure is 38 per cent. At any rate, we are approximately 35 per cent. less competitive than we were in 1978–and, heaven knows, we were not very competitive then.
I shall take 1978 as a base figure. Do the Government seriously believe that the 35 per cent. can be made up by depressing our wages, in relation to those of our competitors, by that amount? If so, how long do they think that process will take? What will happen in the meantime? What will be the likely cost? It is impossible for that 35


per cent. to be produced by a relative reduction in British wages. Surely the Government must accept that view. If they do, the only way in which the gap can be closed is by lowering the exchange rate. That needs to be done, whatever the CBI conference may vote. Until we do that, any possible expansion will run into the gravest difficulties. Unless the present trade imbalance is improved, no sustained recovery will be possible.
That leads me to the inflation rate, which has fallen dramatically. I could not understand why the right hon. Member for Stepney and Poplar did not acknowledge that. We all congratulate the Government on the fall. However, there is a lack of symmetry in the Government's arguments on employment and inflation—that unemployment is the result of world recession and nothing to do with the Government, whereas the fall in inflation is entirely due to the Government. If the depression is world-wide, so must be the fall in inflation as a result of it. Be that as it may, the most important reason for the slowing down in inflation is the sensational fall in commodity prices, which are lower in real terms than they have been since the Korean war. The cost of fuel and material bought by manufacturing industry increased by 3 per cent. or 4 per cent. last year, by 14 per cent. in 1981 and by 20 per cent. in the year before that. The effect is obviously beneficial to Britain, but it had a devastating effect on the Third world—so it is nothing of which to be proud. When the economy recovers there will be an upsurge in commodity prices. I hope that the Government, in conjunction with other countries, are planning for that time. I hope that they are planning to deal with the present impoverishment of the Third world. I hope that they are also planning with other countries for all advanced economies to correlate their fiscal policies to make them expansionary. In this country it is a case not of reflation, but of deflation. We have deflated far more than our competitors, and it is high time that we stopped doing so.
My right hon. and learned Friend the Chancellor made a major mistake in not going a great deal further in aid for industry. What he said today is extremely welcome, and very much better than nothing, but Britain's industrial position is now so serious that there are no grounds for waiting a few months. Anything that the Chancellor intends to do in the spring should be done now. It is pointless and wrong to allow the serious industrial decline to continue. If it does continue, the Welfare State will be in great danger. My right hon. Friend the Secretary of State for Social Services said that that would not affect the National Health Service, but, if the industrial decline continues, it will.
I welcome what my right hon. and learned Friend the Chancellor said this afternoon, but it is much too late and much too little. I hope and believe that there will be a major reflation in the spring. I only regret that he did not announce it today.

Mr. J. Enoch Powell: What an occasion the debate on the Address is for interpolation of all kinds. As I listened to the opening speech of the Secretary of State, I was almost irresistibly tempted—especially by his references to care for mentally handicapped children and the joint financing of care for patients in hospitals and the community—to revert 20

years to the pursuit of the same subjects by one of his predecessors. Then, when I listened to the right hon. Member for Chesham and Amersham (Sir I. Gilmour) I was tempted, but I shall resist the temptation, to explain to him that if we succeeded in getting an even greater surplus on our current balance of payments, we should have to export even more capital than we are now doing unless we remedied that by artificially increasing the rate of exchange.
I wish to divert the House only to refer to something that some of us were surprised to find referred to in the Gracious Speech. That is the Northern Ireland Act and the Assembly set up under it which will commence on Thursday this week. We had not thought the Government would wish to use the Sovereign to advertise that disastrous mistake, which they induced the House to make when we passed that legislation.
When it passed through the House, not only those on this Bench but a score or more of Conservative Members foreshadowed what the result would be—it would cause division where there was no division, exacerbate divisions that already existed, increase disorder, violence and terrorism, and be a further encouragement to those who wish to upset by force the position of Northern Ireland in the United Kingdom. The Secretary of State would have none of that. It would, he said, strengthen the Union; it would help people to get into the habit of working together and collaborating; and it would be a pacificatory influence.
It might be said of him—not exactly as it was said of the conqueror of Gaul—that he came, he saw, he created chaos. There can be few mistakes made by a Government, few disastrous pieces of legislation, that have been punished so swiftly as the Northern Ireland Act. Unfortunately, the punishment in this case falls not upon the guilty, but upon the innocent. Those who sought to prevent that step from being taken have seen their worst fears in the process of realisation.
It is important that the House should understand why those consequences were foreseeable and why their continuance into the future—as long as the experiment is persisted with—can also be foreseen. The Assembly is an elected Assembly without power and without responsibility—already a contradiction in terms, a thing surely virtually unintelligible to the House. The only condition upon which the Assembly can exercise any power or carry any responsibility towards those who elected it is that it accepts what a large majority of those elected pledged their electors, on presenting themselves for election, that they would never accept. The gateway to any degree of responsibility and power lies through the acceptance of the necessity of common decision with political opponents much more politically divided than the two Front Benches in this House, and the pursuit of common institutions between this country, Northern Ireland and the Irish Republic, of which the publicly acknowledged intention is to bring about the transition of Northern Ireland into an all-Ireland State embracing the Irish Republic and Northern Ireland.
There is no question about that. The first condition that I mentioned is written into the face of the Act. As to the second condition, the Minister of State, the noble Lord Gowrie, a week or two ago said that
it is perfectly right and proper for those who consider themselves predominantly Irish to play their part"—
and these are the material words—


in a political life which was primarily oriented towards the Republic.
He went on to emphasise that along with the Assembly
the pursuit of a closer Anglo-Irish relationship
is
an equal leg of a considered policy".
In this debate last Friday, the hon. Member for Antrim, North (Rev. Ian Paisley) told the House that in that Assembly he and his party would work
With imagination, dedication and energy and … put all our talents into producing devolved Government in Northern Ireland".—[Official Report, 5 November 1982; Vol. 31, c. 238.]
He knows perfectly well what the conditions are for converting this powerless, responsibility-less Assembly into anything that can be called a devolved Government. It means one of two things. Either there is acceptance of what his party and the other parties that form the overwhelming majority—and will be almost the only attenders in the Assembly— promised and undertook not to accept when they were elected or it means overthrowing the proposition that no House of Commons or Government will restore in Northern Ireland a devolved Assembly and Government based purely on the principle of straight majority rule.
Faced with this Assembly and this proposition the two elements in the political life of Northern Ireland are beset by opposite but equally real and dangerous fears. The majority say, "This is an institution organised and devised in order, by trickery or deceit and by suborning those whom we have elected, to take us where we have no intention of going." The minority, who do not wish the continuance of the Union, say, "There is evidently the intention— otherwise, what is it we are listening to?—to convert the Assembly by sleight of hand into what was abolished in 1972 by the very same institution that has set this one up."
Those are the two countervailing fears by which the community in Northern Ireland is shot through. They account for the outbursts of violence that accompanied the ending of the elections and the declaration of the composition of the new assembly. They illustrate what was prophesied at the time of the legislation—that the Assembly would be a stimulus to violence and a cause of division and would prove unworkable in itself with evil effects.
But there is a deeper and an older background than the built-in contradiction of the Assembly and the legislation. Ever since this House, 10 years ago, suspended the 1920 Constitution of Northern Ireland and became directly responsible for the government of that part of the Kingdom, one consistent theme has run through the policy of every Government and through all the legislation that has been introduced, with one exception. The Government would never draw the natural and logical conclusion and treat as part of the United Kingdom that which they declared to be part of the United Kingdom. From the very moment that the Stormont constitution was suspended, the then Government set to work creating a new constitution equally, if not more, unique to Northern Ireland—if that be not an improper expression—a constitution that would at the same time separate it from the rest of the United Kingdom and be seen to have the intent of associating it ever more closely with the Irish Republic which claims Northern Ireland as part of its territory.
From 1972 to this legislation there has been no cessation in that course of events. Those who have watched have said, "One thing is certain: the Government

of the United Kingdom are not willing to treat Northern Ireland as what they have said it is—an integral part of the United Kingdom." People draw their deductions from these things. Those who watched the scene were quick to draw the lesson. They said, "Whatever the words of the United Kingdom Government, their deeds speak otherwise. They may write terminology into a statute guaranteeing the status of Northern Ireland until its people want it altered—that was what the Falkland Islanders were told while negotiations were going on with the opposite intent—but their deeds speak otherwise. Their deeds are those of people who are determined, first, to maintain and increase the separation of Ulster from the rest of the United Kingdom and, secondly, to impose upon that Province devices of which the only purpose can be to make that separation final and to work towards re-unification"— "it should historically be "unification"—"of the island of Ireland."
That lesson was drawn by the IRA. It has been its constant encouragement over these 10 years. Through all its setbacks it could reassure itself with the reflection: "But we are bound to win in the end because, after all, we must have Her Majesty's Government on our side. One could not otherwise account for their policy towards Northern Ireland."
The lesson was drawn by the successive Governments of the Irish Republic in whose territory that terrorism is based. They said to themselves, "We have allies, perhaps undeclared, at the top in the United Kingdom. Our aspirations are shared there. Else why should they so legislate and ordain for Northern Ireland?"
Further afield, in the United States, the lesson was also drawn. In the United States, which wishes to see the island of Ireland available for its Atlantic and strategic purposes and does not shrink from using to that end the same methods as it employs elsewhere in the world, they drew encouragement, too. They said, "The alliance holds. We have the United Kingdom on our side after all."
That lesson, those actions that have spoken louder than the words they contradicted, are the underlying cause for the continuance of the terrorist attacks by which this part of our country is racked and which will go on until the words and the actions of the United Kingdom come back into congruity.
People ask me what my answer is for Northern Ireland.
I say:
Do as you would be done by.
If any hon. Member asks my hon. Friends or myself. "What then do you ask for and propose," our answer is that this House should govern and legislate for Northern Ireland and should treat it in every way as what we say it is—an integral part of the United Kingdom. Then at least no one would be in any doubt on what side the House and the Government stand.
The golden rule is a good guide in social as well as in individual life. It is a good guide to the policies and thoughts of Governments:
Do unto others as you would that they do unto you.
No part of the United Kingdom—not East Anglia, for instance, whence comes the Secretary of State for Northern Ireland—would for a moment tolerate—it would hoot off the stage—the suggestion that institutions should be created in its area such as those which were imposed upon Northern Ireland in the previous Session of this Parliament.


If this House will act in Northern Ireland according to its own principles, if it will indeed treat Northern Ireland as it treats the rest of the United Kingdom, it will have turned away at last from that responsibility for the deaths of its fellow citizens in that Province which hitherto has ultimately rested here in this House. It will have absolved itself of that guilt.
Often things have to come to a crisis, a paroxysm, before there can be recovery. When the House sees the consequences of the work of its hands in the creation of this monstrous institution, when it sees that the warnings which it heard and the forebodings which were expressed when that measure was forcéd through under the guillotine have come to pass, surely at last it will say: "After all these years, we have still been ignoring the obvious."
We in this House have the secret, so far as it has ever been discovered, of maintaining coherence of government despite differences and contradictions of interest and of self-identification: we do it through the same constitution, the same representation in the same House, the same institutions and the same laws.
Ask what it is that Northern Ireland needs. Ask what it is that alone will put an end to the tragedy of the last 10 years. It is that this House should do unto Northern Ireland as it does to the rest of this Kingdom.

Mr. Jack Ashley: We have just listened to an extraordinarily eloquent speech, with parts of which some of us might disagree. I am sorry that I am unable to do justice to the right hon. Member for Down, South (Mr. Powell) by commenting on the points that he raised. However, he will understand that my intention is to make three main points concerning mentally and physically handicapped people. I am sorry that he was not tempted to speak about mentally handicapped people, especially as he was intimately concerned about them when he was Minister of Health.
The Secretary of State said that he intends to bring forward a health Bill based on the consultative document "Care in the Community". That document has been welcomed by many people who are concerned with the mentally handicapped because it shows that the Government are aware of the need to help mentally handicapped people living in inappropriate institutions. Nevertheless, the Independent Development Council, established by leading organisations concerned with the mentally handicapped, has expressed deep anxieties about the Government's proposals. I hope that Ministers will take account of some of the criticisms that have been made and which I propose to mention this evening.
The consultative document refers to handicapped people in hospitals and emphasises the need to get them out. That is important and urgent, and I hope that the Government will do all that they can to assist.
The Secretary of State stressed the need to get children out of hospitals for the mentally handicapped. That is important, but it is also important to get adults out. We should, however, remember that there are also many handicapped people in the community. In fact, the vast majority of mentally handicapped people live in the community and are supported by people in the community. The Government should not forget that vast majority of mentally handicapped people who need community care.
The plight of such people is serious. Some of them are supported by parents who are unable to bear the burden. It has been reliably estimated that no fewer than 5,000 seriously handicapped people are living with parents who are more than 75 years old. We should be aware of the burden placed on those old people of caring for severely mentally handicapped people.
If we add those 5,000 severely handicapped people to the number of mentally handicapped adolescents who, thank goodness, will not now go into institutions, it means that an additional 10,000 mentally handicapped people will require community care. The Government, therefore, face a serious problem, and their task is immense. The need to bring severely mentally handicapped people out of institutions cannot be isolated from the problem of looking after the mentally handicapped in the community.
The present inadequate community service for those people could deteriorate unless something urgent is done and better provision is made. There is no doubt that the need to get mentally handicapped people out of institutions is urgent, and I am glad that the Government propose to do something about that. However, the Government's draft circular refers only to 15,000 less severely mentally handicapped people whom they hope to bring out of the long-stay institutions, even though about 40,000 such people are looked after there.
The Government should be committed to bringing out of such institutions every mentally handicapped person who does not need medical care. In other words, mentally handicapped people should remain in such institutions only if they require medical care. That is the only reason for giving hospital treatment to any person, including the mentally handicapped. The mentally handicapped should be cared for in the community and should be helped to live in ordinary houses. It would be wrong for the Government to cream off the more able-bodied 15,000 mentally handicapped because fears would be aroused that the rest of the mentally handicapped left in the institutions would be forgotten. They could be left in rundown buildings and the staff of the institutions would be under greater pressure and could become demoralised.
Will the Minister assure us that he is worried not only about the children, or the minority, important though they are, but about all the mentally handicapped in institutions, as well as the vast majority of mentally handicapped living in the community who are not being adequately cared for by loving relatives?
At the recent MENCAP conference, the Secretary of State said that community care was not a cheap option. He is right. I listened to what the Secretary of State said about joint financing, and I welcome the fact that such financing is to be made more flexible. However, we should clearly understand that joint financing, helpful though it is, is not the answer. The proposals on joint financing made by the Secretary of State this afternoon are only a step forward. The fact remains that mentally handicapped people cannot be got out of long-stay institutions on the cheap and community care cannot be provided on the cheap.
Any Bill for the mentally handicapped that does not provide for a large increase in funds would be mainly—I do not say purely—cosmetic. A large injection of funds is required. Otherwise, the problem cannot be tackled seriously.
We must recognise that local authorities are not prepared to do much about joint funding because they are not keen to help the mentally handicapped. Some local


authorities provide care, but the assistance is patchy. Many local authorities see the mentally handicapped as an electoral albatross and many councillors shy away from the need to fund services for them. They look away and say, "Let us not bother. We cannot provide for their needs." Instead, the local authorities provide bypasses and all the things that the community welcomes. Local authorities do not wish to help the mentally handicapped in their areas because the cause is unpopular. Many councillors, be they Conservative, Labour, Liberal, Social Democratic or whatever, adopt that attitude.
The Government should recognise the apathy that unhappily exists among local authorities about helping the mentally handicapped. Instead of local authorities juggling with their existing funds, the Government should provide them with grants specifically to help the mentally handicapped. The Government should say to local authorities, "Here is £X million. You must spend this money not on bypasses or anything else, but only on getting mentally handicapped children and adults out of those ancient institutions, as well as helping those loving parents who are looking after mentally handicapped children in their homes." If the Government do that, they will do a great deal to transform the lives of the mentally handicapped. It will get them out of institutions and improve their living standards if a specific grant is made.
Representatives of local authorities have come to our all-party group, and we have begged and pleaded with them to accept the principle of the specific grant. They have said "We do not want you or the Government to interfere with our freedom to spend our money in our own way". It is a controversial issue. I hope that the Government, unpopular though it will be, will be strong enough to say to the local authorities "We shall twist your arm and urge you to accept specific grants".
The Government should give real support, not rhetoric, to the thousands of people who are providing community care. In particular, I hope that the Government will end the discrimination against married women and cohabitees who are denied the invalid care allowance. It is preposterous that, while many people caring for the disabled and mentally handicapped in their homes are receiving an invalid care allowance, that allowance is refused to married women and cohabitees. That is wrong, and any Government who accept the practice are perpetuating an injustice and an anomaly.
My criticism applies not only to the Conservative Government. The anomaly was introduced by a Labour Government, and the Conservative Government are responsible for perpetuating it, so it is not a party political point. Both parties are responsible for discriminating against married women and cohabitees. Married women face the same difficulty and the same hardship, the same loss of a job and the same loss of career prospects as others by staying at home and looking after relatives. So why deny them the income?
Successive Governments have said that the income of a married woman is not very important because she depends on her husband. That is not true. It used to be true when I was a boy, but it is not true now. No fewer than 50 per cent. of married women generally are now on the employment register. In the 35 to 54 age group, the proportion of married women is nearly 75 per cent. Therefore, I hope that the Government will think again on the matter.
I hope that the Government will consider introducing legislation to outlaw discrimination against disabled people. This is a highly controversial point. Nobody seriously disputes that there is discrimination against disabled people. Discrimination is experienced by disabled people every day and in every walk of life—in employment, education, the provision of services, transport and access. Some people say that it is better to have education and persuasion. We need education and persuasion to change the public attitude, but we need legislation to back up the persuasion and the education, on the same lines as the legislation on sex and race. That legislation has not solved the problems, but it has at least given women and racial minorities certain rights, and those rights are important.
The report of the committee on restrictions of access to disabled people—CORAD— under the admirable chairmanship of Mr. Peter Large, strongly recommended legislation. I emphasise that I seek legislation only against unjustifiable discrimination. As the report said, we should not argue for the right of deaf people to be piano tuners or blind people to be bus drivers. No one suggests such a nonsensical ending of discrimination.
I also do not suggest that there should be unreasonable provision for disabled people— for example, where the costs of eliminating discrimination would be wildly disproportionate. I seek to outlaw unreasonable discrimination against disabled people. Legislative backing is important and it would fit the new mood of disabled people who are demanding rights, not charity. Those rights are important, and they include the right to freedom from discrimination.
There are provisions on discrimination against disabled people in the United States and Canada. The legislation has worked there, and although we should need to define "unreasonable" discrimination, the concept is well defined in British law and should present no difficulty. We would require a commission with powers to investigate and conciliate and to take appropriate legal action.
I have drawn up a short Bill on discrimination against disabled people. It is based on the CORAD report. Although I shall not win the ballot for private Members' Bills—because I have never won a raffle in my life—I shall offer my Bill to the hon. Member who wins the ballot. It is a modest measure, but it is important and it will help disabled people. I hope that someone will take it on and will pilot it through Parliament. Other hon. Members can build on it and kick it around if they wish before offering it to the Government. The credit for the Bill should go to the hard-working CORAD committee, and I give notice that I shall offer it to the winner of the ballot.
I hope that, in the meantime, the Government will give the argument for legislation earnest and sympathetic consideration and will do what they can to end discrimination against disabled people.

Mr. Richard Needham: I hope that the right hon. Member for Stoke-on-Trent, South (Mr. Ashley) will not mind if I do not take up his theme, but I wish to refer briefly to the speech of the right hon. Member for Down, South (Mr. Powell), who represents with great distinction a constituency which four of my ancestors represented with little distinction during the nineteenth century.


At that time, when Ireland was part of the United Kingdom under its constitution, my ancestors faced exactly the same problems of terror and determination by those who wished to cast the British out of Ireland as are faced in Northern Ireland today and the members of my family who have stayed in Ireland have suffered similarly in the intervening years.
I do not believe that it is right to suggest that the attempts by my right hon. Friend the Secretary of State for Northern Ireland to find a way out of the appalling problems that have existed for hundreds of years are supporting the IRA. The IRA and their forefathers have been in the right hon. Gentleman's constituency for as long as my ancestors. They have never found ways of getting on together and I do not believe that the IRA believes that the Secretary of State's actions are supportive of it.

Dr. Brian Mawhinney: Is my hon. Friend aware that about 10 days ago the philosophy expounded by the right hon. Member for Down, South (Mr. Powell) was offered at a private meeting to his party colleagues who had been elected to the Assembly and was rejected by 17 votes to five?

Mr. Needham: I am grateful to my hon. Friend for that intervention. I do not wish to continue the argument, but I hope that in this instance, if in no other, my ancestors would have been more on the side of myself and the Secretary of State than on the side of the right hon. Member for Down, South.

Mr. J. Enoch Powell: I am sure that they would.

Mr. Needham: I return to matters nearer home. It seems that the Think Tank has sprung a considerable leak recently. I understand that that which is wet will usually find a crack if it can do so, but it is unfortunate that the leak has stifled a debate that is important and should take place. It has turned out to be a godsend to the Opposition who can require the Government to deny the contents of the report while not having to detail what they would do if the position outlined by the Think Tank came about.
There has been a further leak from the Think Tank in The Times today. The option that created such concern a month ago was the suggestion that by 1990 growth would have averaged between ½ percent. and ¾ percent. per year in the latter half of the decade, that inflation would have been running at about 10 per cent. during the same period and that adult unemployment would still be about 3 million. I do not believe that that is necessarily an unreasonable forecast. Bearing in mind the enormous burden of debt overhanging the developing countries, the appalling deficit in the United States, and the general state of the economies of the world, that is not necessarily a situation which will not come about. If it could come about, it should be considered extremely carefully.
The article in The Times today suggests that the figures in the Think Tank's position paper are exaggerated and that even in the low-growth scenario it would still be possible to almost maintain the existing level of social services. However, that leaves out of the argument the questions whether those services are currently reasonable and whether people's expectations demand an increase in those services.
The outburst by Mr. Jack Jones, for example, on the radio today shows that there are increasing expectations among pensioners, and one can understand why.
There is a duty on politicians, as the right hon. Member for Heywood and Royton (Mr. Barnett), among others, has pointed out, not to promise that which cannot be fulfilled. It concerned me greatly to hear the hon. Member for Pontypridd (Mr. John), in his attacks on the Government, say that if only there was a different party in office all these world economic problems would disappear or, if they did not disappear, would be mitigated by the Labour Party making funds available to overcome injustices. That is an intolerable view. It is expressed not only by the hon. Member for Pontypridd but by the Social Democratic and Liberal alliance. If only they were given the chance, they appear to say, the British economy would become that much wealthier. That is a grossly unsatisfactory message to put across. It leads people to think that if they cast their votes in another way they will get an increase from the Government and the State that cannot possibly be justified.

Mr. John: Heaven forbid that I should canvass the votes of the electorate. The hon. Gentleman will see that I was careful to contrast what had actually been done by the Labour Government at a time of parallel and equal economic difficulty with what has happened despite the promises of the present Government. I pointed to the cuts that had been made in the level of benefit now enjoyed by people compared with 1979. That is not unreasonable. We had shown where our priorities lay by the amount that we paid.

Mr. Needham: The period of office of the previous Labour Administration was not a time of parallel difficulty in terms of world economic circumstance. Regardless of the Government in power, the long-term economic decline of this country has continued. I ask the hon. Gentleman to accept that point: it is incontrovertibly true. The reason is that many of the problems of the British economy are structural and not political.
I am not making a party political point. If the problems of the British economy were political, the previous Labour Government, the Conservative Governments of Mr. Macmillan and my right hon. Friend the Member for Sidcup (Mr. Heath) or the Labour Administration of the right hon. Member for Huyton (Sir H. Wilson) would have solved them. Those problems have not been solved. Whatever economic remedies have flowed from the promises given to the electorate, they have not stopped the long-term structural decline of the British economy in comparison with most, if not all, our competitors.

Mr. Mike Thomas: I ask the hon. Gentleman to consider what he has said. I agree with almost 100 per cent. of his analysis. My only disagreement with him is the slur that he thoughtlessly cast upon my party. We have not made the kind of profligate spending commitments or promises of the Labour Party. We have been explicitly careful not to do so. I hope that the hon. Gentleman will not spoil what promises to be quite a good relationship.

Mr. Needham: I should say straight away that I do not consider the hon. Gentleman quite as extreme as those sitting to the right of him and behind him. Nevertheless, the proposals that he puts forward have been tried before over many years. They have not been conspicuous


successes in stopping the decline of this nation. It is dangerous to put them forward now as the remedy that will fulfil the aspirations of the British people.
I should like to make some further remarks about the Social Democratic Party. The right hon. Member for Crosby (Mrs. Williams) could not be more concerned, more interested and more dedicated to achieving improved training standards. Yet virtually no one during her time in office achieved less. It may be a paradox that those who are rougher and tougher and at present in Government have achieved more. Whatever her determination, the right hon. Lady and her colleagues at the Department of Industry were not able to get through the Labour Cabinet the measures needed to ensure that training was put on a satisfactory footing.
It did not require a genius to realise that the baby bulge in the mid-1960s would launch on to the employment market enormous numbers of youngsters in the late 1970s. What was done? Nothing very much. The reason was structural and complicated. It was structural because there was opposition by the trade unions, because management had decided it was not especially interested in training young people and because there was no proper relationship involving education authorities, industry and the Government to provide the necessary framework for training. This basic problem still bedevils the country. It means that hundreds of thousands of youngsters, although they have the ability, have not received the training to enable them to find worthwhile work.

Mr. Stuart Holland: rose—

Mr. Mike Thomas: rose—

Mr. Needham: I shall not give way. Many more hon. Members wish to speak.
The market itself cannot be left to decide how the economy of this country prospers. It is, of course, not left to the market. Nor do other countries leave it to the market. I hope that it will not mean the end of the career of my hon. Friend the Member for St. Marylebone (Mr. Baker) if I point to him, but if one examines what he is doing in technology, communications and cable, one sees undoubtedly a strategy that he puts forward for the industry. That is right. It is what the nation needs.
The Government's reaction to protectionism shows that markets elsewhere are being interfered with. It is right that there should be some reaction to that protectionism. Nor do I always believe, with great respect to my right hon. and learned Friend the Chancellor of the Exchequer, that he does not interfere with the operations of the market. If my right hon. and learned Friend had not concentrated on M3 as the one totem pole of his monetary policy and had instead looked at monetary base, it is arguable that the pound would not have been so strong or interest rates so high. In Japan, the yen has fallen against the pound and the dollar. No one can argue that the Japanese economy is less powerful and less competitive than the British economy. Yet the Japanese Government have managed with inflation rates less than half ours and growth rates four times higher.
It is perhaps because the Japanese have not been obsessed with M3 that they have managed to make sure that their industry remains competitive. It might be argued that the Japanese have a PSBR four times higher than ours.

The reply to that argument is that as long as a country has massive savings, as Japan has, it is legitimate to borrow against those savings.
I am concerned that the effect on British industry during the last three years of a penally high exchange rate, lack of demand and the inability of industry to supply is leading to a chronic shortage of investment and a lack of profits. Productivity has increased, and increased substantially and very encouragingly, but any manufacturer will say that there is a limit to increases in productivity that can be achieved when machinery is wearing out. Sooner or later he has to renew it. If he is making no profit and plant is wearing out, productivity will turn down. It is for that reason that there has to be some managing of the exchange rate in support of manufacturing industry.
I know that my right hon. and learned Friend the Chancellor of the Exchequer will refer to the fact that the CBI was split on this, but in what way was it split? I suggest that those on the retail and commercial side of the CBI wanted to make sure that they could continue to have the benefit of cheap imports, as against those in the manufacturing side. Those in the commercial and retail section should think carefully before promoting that line too far, because if imports remain cheap, and industry suffers, the balance of payments weakens and exports will fall. Sooner or later the pound will fall, and interest rates will have to rise and any growth in the retail section and consumer demand will falter, and they will find themselves suffering.
The exchange rate cannot be allowed to find its own level if it is the level that it has now. There is further room for cutting interest rates, and therefore affecting our exchange rate against the deutschmark, the franc and the yen, and that is something that the Government will have to consider quickly. It is often said by those in power that, on balance, there is not much that they can do to affect the state of the economy. However, there comes a time when, if they do too little and too late, they will push the manufacturing sector into a position from which it cannot recover. That time is now not far away. There are therefore two short-term developments and two long-term developments that we must consider.
It is not sufficient to say that we should be in favour of free trade. We have to work for it. The work for it needs to be undertaken fast, and by my right hon. Friend the Prime Minister. My right hon. Friend is, apart from the Prime Minister of Luxembourg, the longest serving leader in the Western world. It is high time to call together the industrial nations, particularly as we rely on manufacturing exports for survival. We must stop the desperate move to protectionism. It will do untold damage not only to us and to other industrial nations, but, as Labour Members ought to know, to the Third world. It can only be sorted out by international co-operation, and not by "beggar your neighbour" policies, which is what happened in the 1930s. It frightens me to realise that it might happen again.

Mr. Stuart Holland: I am not impressed by the hon. Gentleman's argument, which is irrelevant. However, surely the point is also that it is not just "beggar my neighbour" protectionism that is the threat; it is "beggar my neighbour" deflation. I may be anticipating the hon. Gentleman's second point. One country's imports are another country's exports. If the Prime Minister takes an international lead, why not look at those European


countries that are reflating' We want "better my neighbours" policies. Reflation could create millions of jobs in Europe within the next three, four or five years.

Mr. Needham: Some countries, such as France and Canada, have tried to reflate.

Mr. Stuart Holland: In isolation.

Mr. Needham: It has had to be aborted. Unless there is international agreement, it will be extremely difficult to get any form of world-wide reflation. Equally, it is crucial that inflation comes down and public sector borrowing does not get out of total proportion to Government finances. It is not feasible to follow the suggestions of the hon. Gentleman and other hon. Members for a massive increase in public spending. That would lead to higher interest rates, a lower pound and higher inflation.
There is not that much that we can do, and the whole point of my argument, which I am sure the hon. Member for Vauxhall (Mr. Holland) misinterpreted, is that the structural base of the United Kingdom economy, added to the world recession, which will not disappear in the medium term, does not allow us to produce massive increases in output and rises in the standard of living or increase our ability to pay for those things which the hon. Gentleman and I would not necessarily agree to be sensible or reasonable.
Secondly, part of the answer to bringing down the inflation rate is to make sure that we maintain control of wages. I do not support the argument that lowering wages prices people into jobs. However, I am convinced that increases in wages above productivity in the present state of the world economy will do nothing but lose jobs.
I can give a good example of that. In Detroit three weeks ago I was told by the leader of the united steel workers that labour rates in the steel industry in the United States are $ 23 an hour, whereas in Japan they are $13 an hour, but Japan produces twice as much steel per worker as America. The result of the protectionism pressures now occurring in the United States is to stop imports of our steel. It is because American steelworkers have overpaid themselves with too little investment and profit, and produced too little for too long that they now face such problems. Whatever happens, we should not get ourselves into that position. Equally, we must stop those pressures for protectionism where we can.
Therefore, I am sorry to have to say that it is unlikely that unemployment will disappear in the short or even the medium term. For that reason, I support my right hon. and learned Friend when he says that we must make sure that the unemployed have a reasonable standard of living. That has to be right. We have to make absolutely certain that people who are cast on to the scrap heap, which is what it is, are not left there in financial misery as well as in the other miseries that they have to suffer.
There are certain steps that we must take. We must reduce the size of the labour market by keeping youngsters longer in some form of training. I do not support the view that we have heard expressed from Treasury circles, that in a year or two that support can be phased out as the economy improves. We must have longer training than we have now. We must also ensure that the job release scheme is brought down in the age range, so that people who wish to get out of work can do so.
There are other points. We must have a forecast of what labour markets are likely to be in the 1990s. The United States is a free market economy, but it produces projections with a 10-year forecast of what labour markets in each sector of the economy will be over the next five or 10 years. This is useful for schools to enable them to have some idea of what sort of jobs their youngsters are likely to go into. The United Kingdom has the capacity to do this, and we should do it.
We should also have some sort of strategy to develop winners. There are many Conservative politicians who, for understandable reasons, think that any politician or civil servant is incapable of taking a commercial decision that would be anything other than a disaster. It interests me that so many become directors of companies and advise those companies on what is likely to happen. We cannot leave the economy with an overvalued pound, an uneconomic industrial base and difficult structural problems and hope that the market will solve everything, because it will not. If we believe that we do not need to plan the economy at every level, which I accept, we should consider development by sector and try to find communities that are likely to prosper and industries that will prosper in them.
The shoe and textile industries on route 128 around Boston 15 years ago were on their knees and tens of thousands of Bostonians were unemployed. Now around that highway, because of the interaction of universities, state government, industrialists and trade unions, more than 20 companies are producing about $500 million worth of high technology goods a year. We do not have such a concept in Britain. We must rely on the industries that face increasing competition from the Far East and the developing world, competition which we should welcome, surging up again and employing young people.
That is not likely to happen, so the Government must state clearly that the outlook for unemployment is grim and that they are determined to make a priority of helping the unemployed, that they will continue to do all that they can to reduce the labour market, to train youngsters and to ensure that other proposals such as job sharing can assist people to bridge the gap between unemployment and work. If we do that, the horror of the 1930s can be avoided and the people will respect us because we shall have been honest enough to tell them so rather than promises being continually given by Oppositions, who will never have a chance to fulfil their promises but who undermine the integrity of all politicians.

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. At least 15 hon. Members are trying to catch my eye. If we have 20-minute or 25-minute speeches, no more than five hon. Members will be able to speak before we hear the Front Bench speakers.

Mr. Andrew F. Bennett: I shall relate the debate to my constituents. The right hon. Member for Down, South (Mr. Powell) should address himself to my constituents. He told us that the majority in Northern Ireland wish to continue with the Union. The question increasingly is whether the majority in the United Kingdom wish to continue with it. There is a growing horror in areas such as Stockport about the cost of maintaining the Union in terms not just of those killed or maimed, but of money.

Mr. J. Enoch Powell: If that is to be the policy and if that is the real intent behind the legislation—the hon. Member for Stockport, North (Mr. Bennett) will agree that we should be candid—let it be proposed and debated and not wrapped up in the statement that the legislation is intended to strengthen the Union and that there is no possible outcome except one that is acceptable to the people of Northern Ireland. In this matter, candour is of the greatest importance.

Mr. Bennett: I fully accept that, but my constituents should be asked about their attitude to the Union. The behaviour of Northern Ireland politicians increasingly convinces my constituents that the Union is no longer a good thing. Unless the politicians offer a compromise and a united approach to their problems, my constituents will become more disillusioned. The right hon. Member for Down, South will find that the views of the majority in the United Kingdom, not just in Northern Ireland, will decide the future of the Province.

Mr. Powell: I have no doubt that the hon. Gentleman's constituents will insist on a similar compromise between the two main political parties in the United Kingdom as a condition to their being allowed to form a Government, remembering that there is much less difference between them than there is between the SDLP and the Unionist Party in Ulster.

Mr. Bennett: There is some unity among almost all the political parties represented here, in that they have a constitution that they accept and for which they are prepared to work. The difference in Northern Ireland is that many politicians do not accept the constitution.
However, my constituents may feel that the Welfare State is more important. The debate has produced two arguments. The first is that if the economy was better managed and the country more prosperous, we would have less unemployment, fewer people who must rely on the Welfare State and more money to finance a better Welfare State. I accept that argument, but I shall not pursue it tonight. Another argument is equally important. Although the Labour Party may not manage the economy better than this Government, we should be prepared to spend more on maintaining and expanding the Welfare State. My right hon. and hon. Friends on the Opposition Front Bench also advance that argument.
In my constituency, there are substantial areas of need, but there are also many areas where people would not suffer too much if their living standards were cut. In Stockport, as in London, there are many affluent people who could afford to contribute a little more in taxes to raise the living standards of many of my constituents. The Government should not push the country into investment in cable and other areas until they have managed to give us a decent Welfare State. Cable television will not be an attraction to my constituents; it will be just another area where they are disadvantaged. There is a great fear that many companies will not wish to lay cables on some housing estates; but, even if they can be forced to do so under the franchising conditions, many of my constituents on the lowest incomes could not afford cable television.
The Secretary of State's opening speech was a window-dressing exercise. He tacked together many small items to suggest that the Government have a policy for the Welfare State, but they do not. He mentioned the elderly, especially those who suffer from senile dementia. He said

that the Government will set up a scheme to show good practice. Many local authorities know what good practice is, but they do not have the resources to show it. The result is the growing problem of neglect of the elderly and sometimes physical abuse by individuals who feel that they can no longer cope.
I am greatly disturbed by the number of my constituents who keep saying to me, "Please can you get our elderly relative into hospital? We cannot cope any longer." The geriatricians say that they would like to admit another half dozen people to hospital because they understand the need in an area such as Stockport, but the beds are not there to meet that need. I suggest that it is a matter not just of demonstrating good practice in the care of the elderly, but of making the resources available.
Then there is the treatment of the elderly by doctors. In Stockport, there are good family doctors who care well for the elderly, but there are also bad ones. The difficulty is that the good family doctors are getting an increasing proportion of elderly patients on their lists, when they need much smaller lists. The trouble with the vast majority of elderly people is that they are doing their own doctoring. They observe the effects of the drugs prescribed by the doctors. They go back to the doctors—often not to the doctor, but to the receptionist—and say, "The pills that you gave me last week seem to have worked. Please can I have some more?" The doctors are not observing how the patients have responded to the drugs. Patients themselves make the observations.
I know elderly people in my constituency who have been on a course of drugs for five or six years, and who go back time and again to ask the doctor for the same prescription. People are often prescribed series of drugs, many of which they no longer need, because the basic reason for which the drugs were prescribed has disappeared. Sometimes when these people are taken into hospital the drug doses are sorted out, and the problem which appeared to be senile dementia turns out to be nothing more than the wrong dosage of drugs. I suggest, therefore, that if the Government want to make major improvements in this connection, they need to spend more money on facilities for the elderly and to ensure that doctors have fewer elderly people on their lists so that they can give them better treatment.
The Gracious Speech talks about the privatisation of British Telecom. I suggest that the Government should look more at the service that British Telecom can give to the elderly. I am disappointed at the lack of telephones for the elderly in Stockport. The telephone is one way to prevent elderly people from feeling cut off from their friends and relatives. Of course local authorities have a duty to provide telephones for elderly people who need them if that is the only way to summon help when it is urgently needed. However, Stockport has got round that duty by putting in a CASS alarm system. When a person is taken ill he can quickly summon help by an intercom. However, it does not have the telephone's advantage of enabling them to keep in contact with their friends and relatives in other parts of the country.
The Government should ensure that telephones are provided as a service for the elderly. Telephones should be given to the elderly as a help, not counting the cost. I fear that if British Telecom is expected to make a clear profit in everything it does, it will start to increase its


charges for the provision of telephones for elderly people. I believe that the provision of telephones is a service that should be encouraged, not discouraged.
There are many other issues that I should like to mention. One concerns the incomes of the elderly. It is clear that most elderly people feel that they are in considerable financial difficulty if they have only the State pension to live on. Indeed, 2 million of them have to receive extra from supplementary benefit. When one sees their households, one realises how poor they are compared with people who have good jobs. We should be able to afford to give them more.
I was disappointed with the Chancellor of the Exchequer's suggestion in his statement this afternoon that if elderly people have been given extra this year, it will be clawed back. He should look at the relationship between elderly people's expenditure and the retail price index. Most of the gains that have been made in the retail price index affect interest and mortgage rates, but those represent a small proportion of elderly people's expenditure. In fact, their cost of living is about 4 per cent. higher than the retail price index. That fact should be taken into account in working out the provision for the elderly next year. In my view, the Government should not talk about overprovision for pensioners. They should say, very firmly, that 2 million pensioners are on supplementary benefit, and that at least in their case the pension is inadequate to meet their basic needs.
One of the worst aspects of the Government's policy, particularly for the elderly, has been the insistence that gas, water and electricity undertakings should increase their standing charges. The effect on the elderly is unfortunate. On the whole, elderly people are small consumers, and therefore they are penalised. If the Government insisted that the utilities took away standing charges and increased the basic unit charges, they would greatly help most elderly people. These people feel bitter when they cut down on consumption and find that it is not the unit costs which cause the large bill, but the standing charges.
I shall say a brief word about hospital workers. In my opinion, the Government should make a statement in this debate saying that they intend to deal with the basic problem of low pay for most of the people working in the National Health Service. They should bear in mind the short passage in the Gracious Speech about carrying out the European convention on women's rights and equal pay for work of equal value. They should accept that in the NHS there has always been a misunderstanding on pay. That misunderstanding stems from the idea that historically doctors were almost all men and nurses almost all women and pay was based on rates suitable for men and women 30 or 40 years ago. Therefore, on the whole, ancillary workers had to be paid less than nurses.
Having achieved equal pay, we need to have equal pay for equal value. The difference between the money to be paid to nurses and doctors should be far less than it was historically. The Government could then pay nurses more, and there would be sufficient room to pay reasonable wages to most NHS workers. That is long overdue. If we want value for money from the Health Service, we must pay decent wages and have a contented labour force. The tragedy of the past six months is that the bitterness will smoulder on for years in the Health Service. The only way

to get rid of that bitterness is to pay decent wages and not insist either on no extra money or a small increase next year.
The Government are committed to cutting taxation, but in fact they have trebled taxation on unemployment money. The contributions to national insurance are taken out of income after taxation. Therefore, the contributions are taxed. That source provides the Government with about £2 billion. So the money allocated to unemployment is taxed to start with. Then, three years ago, the Government said that, in lieu of taxation, there would be the 5 per cent. cut—and now we have taxation itself. Therefore, the money is taxed three times. I should have thought that, for a Government committed to cutting taxation, it would be logical to tax once—either when the contributions are paid or when the money is paid out—not to have three bites at the taxation. Many right hon. and hon. Members have suggested that course. Certainly, if the Chancellor of the Exchequer had any money to give away in the Spring budget, he should restore the 5 per cent.
Equally essential are long-term supplementary benefit rates. It should be remembered that more than 1 million people have been unemployed for over 12 months and they must be allowed a long-term supplementary benefit rate rather than the inadequate short-term rates.
The Welfare State must not just be about financial provision or health care; it must also ensure that people have the opportunity to maintain good health. It is sad that the Government have not taken a lead in banning lead in petrol or much of the misleading advertising of many food products. Such advertisements claim to offer people good health, but the food has the opposite effect. The Government should be taking a lead in health care and giving people positive advice on good diets. They should ban the misleading advertisements by many food manufacturers which suggest that their food has a health-giving property when it does not, particularly when used in the wrong quantities.
The Welfare State is important to Britain. We should guarantee it to everybody, not because they are rich or poor, nice or nasty, employed or unemployed. It is a minimum standard of living, and the mark of our civilisation is whether we can afford a decent Welfare State. When I look round and see the affluence in Britain, I firmly believe that we can afford to provide and should be working towards a decent Welfare State.

Mr. Timothy Smith: The hon. Member for Stockport, North (Mr. Bennett) is a good deal more honest in many ways than many of his hon. Friends. He paints two scenarios. One is that in which a Labour Government succeeds in securing economic growth, reduced unemployment and, therefore, more resources to spend on the Welfare State. In the other scenario that does not occur. He goes for that option, but still wants to increase the money that we spend on the Welfare State by means of an increase in taxation. He seemed to suggest that more taxes on the so-called rich would be sufficient to pay for such increases. However, since he pooh-poohed £142 million of additional expenditure in 1983–84 in the Chancellor's statement as entirely inadequate, it would require a large increase in taxation right across the board to pay for the changes that he would like to see.
I want to speak briefly about the management of the National Health Service. Before I do, I wish to refer to one


matter that was raised by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour). He mentioned the consultative document published by the Oxford regional heath authority. I entirely accept his point about population figures. The calculation of RAWP should take into account the variations in population between regional health authorities and the fact that in the Oxford region the population is rising rapidly.
However, the document was disgracefully irresponsible and politically motivated. Some of the proposals that it put forward could not be carried out by the regional health authority without a change in the law. In any case, the real expenditure for the RHA is due to rise in 1983–84 by over 1 per cent. Therefore, the authority would have been better advised to look at ways in which it might improve its efficiency rather than demanding yet more money for the next year.
It is that aspect of the Health Service that I wish to talk about. When the House last discussed the NHS on 20 October I was struck by the negative tone of much of the debate. The subject was the crisis in the National Health Service. Labour Members spent most of their time attacking the Government over the pay dispute. Their solution was a simple one—to pay anything that unions demanded although there was no indication where the additional cash would come from. Indeed, the answer to all such problems from Labour Members is to increase resources and to throw more cash at the problem.
Firstly, the Government have increased resources by 5 per cent. in real terms in the past five years. That is a remarkable achievement. Second, whatever happens, resources will always be severely limited. Third, increasing resources will not in any case solve all the problems that the NHS faces. One only has to look at the figures since the foundation of the NHS in 1948–49 to see that.
The proportion of our gross national product which is spent on the NHS has risen from 3·92 per cent. in 1949 to 5·55 per cent. in 1979. It is hard to see that there has been a commensurate increase or improvement in the services provided. In addition, if one looks at the total cost of the NHS at 1949 prices the figure for 1949 is £437 million; for 1959, £545 million; for 1969, £839 million; and for 1979, £1,329 million. Therefore, there has been an increased expenditure in real terms in the NHS of 300 per cent. in the past 30 years. It is hard to see an improvement in the services that one would expect as a result of those figures.
The NHS faces some fundamental problems which are not faced by any other public service. First, the demand for health services is completely open-ended and therefore difficult to forecast. In economic theory health services can only be rationed by price, but since the service is free there is no price mechanism to control it. It is interesting to note that where price does occur to some extent demand fluctuates accordingly. For example, it is clear that when prescription charges rise demand drops, although those in real need always have free prescriptions anyway.
Another problem that the NHS faces is that the real costs of the service are rising. It is understandable that every time new technology makes a new remedy available, potential beneficiaries should demand access to it, whether it be a kidney machine or a heart transplant. All that is expensive and simply compounds the problems that the NHS faces.
A more constructive response than the suggestion that we should simply increase resources is required in such circumstances. We would all support that but it is much better to look at other ways of tackling the problem. In that context I was struck by a speech that was made in the course of the debate on 20 October by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). He made several positive proposals for change in the NHS.
We should be considering how to secure better value for money than we already have in the NHS. How can we improve its efficiency and effectiveness? We must contend with the fact that in the NHS responsibility for the spending of money is devolved to regional district health authorities. That was recently considered by the Treasury and Civil Service Committee. It noted:
In all cases … the control exercised by Departments over the expenditure involved is less—and often very considerably less—than the control Departments have over their own direct spending. This is the inevitable and intended result of devolving responsibility to these bodies. The degree of control varies significantly … the Department of Health and Social Security lays down national objectives and priorities, monitors performance and carries out an audit. Health authorities prepare strategic plans which are discussed with the Department.
In their reply, the Government observed that the responsibilities of the DHSS extend to five separate and large businesses which vary in type and span of control, accountability and methods of working. They include nearly 1 million staff employed by the NHS, who are responsible for the allocation of money provided by DHSS Ministers for which they remain accountable. Therefore, both the Treasury Select Committee and the Government are agreed on the need for improved financial management in the NHS.
In its note on this subject which was published as an appendix to the Government's response to the Select Committee's report, the Treasury and the Management and Personnel Office said:
Where a department pays out grants to other agencies which themselves carry the direct responsibility for how the money is spent, the department will require an information system and the appropriate tequniques (eg of investment appraisal) which enable it to make a good job of its responsibilities for the funds in question. The nature of the system will vary with the department's relationship with the spending agency … The department may want to encourage the use of management accounting in the bodies it finances (a good example is DHSS's concern with management accounting by health authorities), partly as a source of information to help both formulation of policies and priorities and monitoring; and partly to encourage efficiency in the spending agencies.
The Public Accounts Committee has also addressed itself to this question and recently expressed the hope that the new arrangement for annual reviews of RHAs, to which my right hon. friend referred earlier, and DHAs would lead to a major improvement in financial planning and control and in accountability to Ministers.
The PAC urged the health Departments to concentrate on the speedy development of performance indicators. I support that proposal because I believe that the introduction of proper management information systems will facilitate the development of performance indicators. These systems will also highlight a number of weaknesses in the NHS which are currently suspect. But although people suspect them, they find it difficult to demonstrate that they exist, largely because most of the evidence at present is anecedotal.
Many people believe that the management structure in the NHS is weak. This claim is often made about hospitals especially, because they are run jointly by administrators,


doctors and nurses in a sort of joint effort. This problem was touched on briefly by the Royal Commission on the National Health Service which concluded that the three professions concerned should devise mechanisms to ensure that decisions could be made quickly and implemented effectively. My feeling is that in these circumstances much better decisions would be made if there was one person responsible for making them and that that is what would be most desirable in hospitals.
Another suggestion that is made about the NHS at present is that there should be more local accountability, and I support that. The CHCs have a role to play in addressing themselves to the quality of the service provided locally and to patients' complaints, but they could spend some of their time examining the efficiency and effectiveness of their local district health authorities. It would be helpful, perhaps, if the accounts of the district authorities were published in an intelligible form with annual reports and if the CHCs examined the performance indicators, the manpower statistics and the rest of it, to see whether they were getting good value for money locally.
Another suggestion that is often made and which it is difficult to demonstrate at present is that the National Health Service is overmanned in certain respects. No one ever suggests that there are too many doctors or nurses. The comments usually relate to the ancillary services. Here we have a simple way to discover whether this contention is true. All we need do is put the services out to private tender. We must remember that 30 per cent. of the expenditure of the NHS goes on just such services—catering, portering, domestic services and housekeeping, administrative and personnel functions, estate management, linen and laundry, security, building and plant maintenance, professional services, cleaning, pest control and technical services. There is a long list of functions that no private business would try to provide. No private firm would ever try to provide all those services in house. It would concentrate on developing its own expertise and go outside to specialists in those services. In the same way, the NHS would benefit if it concentrated on health care and at the same time contracted out a large number of those other services which have nothing to do with health care. In my view, the district health authorities should be required to put these other services out to tender.
A combination of these things—better management information systems, improved manpower statistics, the development of performance indicators, improved management structure, increased local accountability and much greater privatisation—would result in better value for money in the NHS. If we had better value for money, we could have an increase in both the quality and the level of services being provided for the same sum of money that we are spending at present.

Mr. Mike Thomas: I cannot agree completely with the hon. Member for Beaconsfield (Mr. Smith)—no doubt he will not expect me to—but I agree with his supposition that the Government have failed to make the National Health Service very much more efficient than it was when they assumed office. However, I do not believe that the hon. Gentleman's

suggestions should be scoffed at as they were from the official Opposition Front Bench. They deserve serious consideration.
I cannot go as far with the hon. Member for Beaconsfield as I can with the hon. Member for Chippenham (Mr. Needham) and the right hon. Member for Chesham and Amersham (Sir I. Gilmour). It is a source of no embarrassment to me and, I hope, a source of minimum embarrassment to them to say that I agreed with most, if not all, that both of them had to say. Sadly for the country, they and the party of which they are members are a considerable distance apart.
The same can be said of the hon. Member for Pontypridd (Mr. John). Labour's choice for the title of this debate—the dismantling of the Welfare State—is just another example of opposition by hyperbole. Their hope is that if something is said often enough people will come to believe it. That is not really the politics of the hon. Member for Pontypridd, and it showed in the uneasiness of his speech.
The Government are not dismantling the Welfare State. The truth is that they would not dare do so, even if they wanted to. However, all the evidence is that they are systematically neglecting it and placing an emphasis on the private sector that is wholly unwarranted. When Ministers say that the private sector brings in more resources for the Health Service, we are entitled to ask, "More resources for whom?" I suspect that they are not for the people for whom most of us on the Opposition Benches care most.
The real problem for both the old parties, Labour and Conservative, is not that the one is the protector and preserver of the Welfare State and the other its destroyer, but that both are so imprisoned by the rhetoric necessary to satisfy their activists and the hard reality of the iron grip of the vested interests which pay their bills that neither is able to make even a token attempt at an objective approach to our welfare services. If anyone doubts that that is true of the Government, no doubt the Minister for Health will say why the Greenfield report on prescribing, which proposes the extension of the successful arrangements for drug substitution which are already saving millions of pounds on drugs in the hospital sector, has been hushed up for the past eight months. Could it have something to do with Ministers' perception of their Department's role as sponsor of the pharmaceutical industry rather than the protector of the taxpayer and the National Health Service? If they care as much as they say about the financial position of the service, why, when there is between £50 million and £200 million of savings to be found here, is there no sign of the Government looking for it? Instead they try constantly to pretend that it is not there.
The Government keep the vested interests happy, and for the activists they mouth the rhetoric of cuts in budgets, revelling in the alarmist tales that result. Then they get a little frightened and put in the minimum of funds to keep the service afloat. The statement today by the Chancellor of the Exchequer reflected that. The current review of the position of Great Ormond Street hospital reflects that, and I hope that the same approach will be applied to the breast screening clinic at the Royal Marsden and at hospitals such as St. Mark's in Islington, where competition for local resources can often threaten a national and international centre of excellence.
Meanwhile, Labour does its rhetorical best, too, meeting each pressure group and each party conference resolution with commitment after commitment and billion


pounds after billion pounds. I notice that last Wednesday, when it came to committing the official Opposition in the House, the right hon. Member for Ebbw Vale (Mr. Foot) was less forthright. It is a bit tame to have as the starting point in any political party's policy on health the integration of family practitioner committees into the National Health Service, worthy objective though it may be. The right hon. Gentleman went on to propose a return to the system whereby hospital consultants are genuinely full time—again, a very worthy object, although it raises some libertarian problems and difficulties with the BMA—and the removal of all pay beds, when we know that there is not a real problem any more, and that all that it will do is cost £50 million. He also proposed the cancellation of the £4 million—the sums are decreasing—tax concession that is given to the purchase of private health insurance. That concession is available only to people who earn less than £8,500 a year—hardly a significant factor in the redistribution of wealth.
There is a nice little "Footite" fudge on the NHS dispute. It is a call for a once-and-for-all end to the system whereby NHS workers' pay depends on their willingness to take industrial action. There are, of course, no concrete proposals. They would inevitably upset the Labour Party's paymasters—the trade unions—and the hon. Member for Wood Green (Mr. Race) would jump up and down objecting to it.
Finally ,"—
the Leader of the Opposition says—
there should be the abolition of all charges for prescriptions, dental and optical treatment." [Official Report, 3 November 1982; Vol. 31, c. 13.]
That is £450 million worth. There is not a chance in hell of those changes being implemented. It is cheap deception of the worst kind. Nevertheless, the right hon. Gentleman's package is modest compared to that of the hon. Member for Crewe (Mrs. Dunwoody). I am not sure whether the hon. Member for Crewe or the right hon. Member for Ebbw Vale is telling the truth. Nevertheless I suspect that the hon. Lady will find that her leader's commitment to the NHS is more modest than her own. The Secretary of State is right—no one believes it, not even members of the Labour Party who spout those sentiments.
William Beveridge, a noted Liberal, is appropriated with political sleight of hand by the Labour Party whenever it suits it to do so. He did not conceive of the Welfare State as an institution or a set of provisions and rules; he saw and I and my party see the Welfare State as an assurance to one another by the British people. It was an assurance that old age or youth, illness or handicap, whether physical or mental, suffering an incapacity to work, an inability to feed or house oneself, or a need that had been imposed by some accident of circumstance would not lead to impoverishment or a diminution of human dignity. It was an assurance that no person was an island and would not be left to suffer without help, that collectively as a nation we accepted that responsibility and commitment. That assurance should carry no riders. It should carry no assumption that only the "deserving" should be assisted. Nevertheless, that Victorian perception still persists on the Conservative Benches. That is the principal reason why the long-term rate of supplementary benefit is not applied to the unemployed. Some Conservative Members have had the courage to raise that matter.
Neither should there be any implicit conditions in our commitment to the Welfare State that to be helped we must maintain municipal standards of housekeeping or not offend the trade unions. I turn now to the Labour Party's problem of vested interest. Many psychiatric and mentally handicapped patients are prevented from doing simple therapeutic work in their hospitals—tending the garden, growing vegetables, painting walls, decorating their rooms and making them comfortable—because unions, including the one that sponsors the hon. Member for Wood Green, do not permit it. Unions take the view that such activity should not occur and weak management has consistently acceded. I am glad that the hon. Member for Crewe finds the matter funny. It is no laughing matter for many seriously ill and handicapped people.

Mrs. Dunwoody: Is the hon. Gentleman saying that the Social Democrats believe that everyone in an institution should be used as cheap labour? If that is his party's policy, it would be helpful to have it on record.

Mr. Thomas: Is it not absolutely typical that, when one is trying to make sensible points to assist people affected by the vested interests of the trade unions, because of the connection between the Labour Party and the trade unions and because of the hon. Lady's incapacity to condemn it, or even to talk or discuss it decently, the hon. Lady has to make a cheap jibe that she knows is untrue? I never said anything of the sort, but that is what the hon. Lady feels that she must say. I challenge her to say that she is prepared publicly to denounce and condemn any trade union that tries to secure an agreement to prevent psychiatric or mentally handicapped patients engaging in such therapeutic activity as I have described. If she does, I shall have some respect for her argument.

Mrs. Dunwoody: I utterly condemn anyone who does not provide every opportunity for therapeutic care to those in any form of institution, whether mentally handicapped or mentally ill. Moreover, I condemn those who suggest that painting walls would help those most in need.

Mr. Thomas: Perhaps we should be more precise. Will the hon. Lady condemn what has happened all over the country as regards psychiatric patients who—

Mr. Race: Where?

Mr. Thomas: —are prevented from assisting in gardens, for example, because of agreements with the unions? St. Bernard's hospital in Southall, one of the largest psychiatric hospitals in London, is an example. Will the hon. Lady say that that is right? I have never heard her condemn it before. It will be interesting to see whether it gets her into trouble with those who pay the Labour Party's bills. Another example is Manor Park hospital in Epsom. I was recently taken around a ward in that hospital. I was told that the walls were covered with record covers because the unions would not allow patients to paint or paper their rooms. They were allowed only to decorate it by pinning record covers on the walls. If the hon. Member for Wood Green whose election is sponsored by the union that engages in that practice—

Mr. Race: Garbage.

Mr. Thomas: The word "garbage" does not disprove what I am saying. The hon. Member knows as well as I do that that practice goes on. That is an example of vested interests. [Interruption.] The hon. Member for Wood


Green has just given an example of what I call the Stalinist approach to facts. When one hears something one does not like, one says "Blatant lies" in the hope that that will disprove the argument. That is not the principal criticism of Labour's approach. The principal criticism is that it has become increasingly centralist and corporatist, regardless of the implications for libertarian principles and the need to create an enabling society. The Welfare State should enable others, not imprison them and make them dependent. Why has Labour, when in office, never reformed the social security system and its demeaning procedure, the means test? It was left untouched when the hon. Lady was in office and remains as it was then. Why did the Labour Party never deal properly with the poverty trap through taxation reform? In Government, the Social Democrats and Liberals will do both.
Social Democrats criticise both Labour and Conservative Parties for their lack of imagination in dealing with welfare problems. The NHS is a classic example. It is rapidly becoming the Poland of British politics. It is constantly being fought over by warring factions that care nothing about the devastation that they may cause in the territory that they may use as the battleground. The fight serves the NHS not at all. I welcome the Secretary of State's proposals, but they are tinkering. The sums of money to which the Secretary of State and the Chancellor referred will be thinly spread and produce no material benefit. It is not true, as the hon. Member for Beaconsfield said, that trebling of expenditure on the NHS has made no difference in 30 years. Like me, he was not aware of the NHS 30 years ago. It was much more primitive than it is now. But the Cinderella service will remain unless we do something about it. The hon. Member for Crewe always asks me to be positive. She might do me the courtesy of listening when I am. We intend to innovate and experiment with new methods by which we shall try to direct funds to areas of higher priority rather than spread them evenly across many services. We do not intend to limit those funds to geographical areas. There are problems within the regions themselves. There are vulnerable groups such as the elderly, the mentally handicapped and children. We all know where the problems are. Some institutional problems are scandalously bad. We shall try direct funds into proposals to help to strengthen primary care, into community services that are designed to prevent people from being put into institutional care and into the activities that would help to create employment.
If we look at the Prime Minister's proposals to expand construction and at community care, such as the home help service, which needs to be expanded, there are enormous possibilities. Further money could be spent on priority areas in health and social services so that employment is expanded in a desirable way. We estimate that with the expenditure of small sums of money up to 100,000 women could get part-time employment in health and social services in jobs that they would enjoy. That would probably bring their families above the bread line, if their husbands were unemployed or low-paid, at a small cost to the Government.
The questions that the Government must answer are in part moral. I make no apology for using the word "moral". It was first used by the right hon. Member for Chelmsford (Mr. St. John-Stevas) when he was talking about

unemployment. The greatest threat to the Welfare State is not the Government's approach to the National Health Service or to social security. It is whether the NHS and the Welfare State can survive the Government's failure to make real improvements in the country's economy.
The depressing thing about the Think Tank report was its predication of a level of economic performance that would put in question our capacity as a country to finance the assurance to our fellow citizens that the Welfare State involves. The depressing thing about the Chancellor of the Exchequer's statement today is that the modest measures are the most that a Chancellor of the Exchequer, desperate to start a pre-election boom, dares to take, so weak are the economy and the pound after three years of Conservative economics.
I suspect that the package will have almost no effect, even in the medium-term, on unemployment. It will have other consequences, as the continuing level of unemployment has had. I say that not to excuse but in part to explain. It is no accident that reported crime rose by 10 per cent. in 1981 from 1980. It is up again this year.

Viscount Cranborne: rose—

Mr. Thomas: The ability of the old and the city dweller to live without fear is part of the Welfare State too. The truth is that the Welfare State is now under threat from both the ideology and incompetence of the Right and Left. The answer is not to pretend that there is no problem, as is the Pontius Pilate practice of the Secretary of State and his acolytes, nor is it to pretend, as the hon. Member for Crewe and her hon. Friends do, that everyone can win and have prizes, every lobby can be satisfied, every wage demand met, every charge abolished and all the billions spent that are contained in the Labour Party's programme for 1982. Without real economic growth our welfare services will be in serious trouble—

Dr. Mawhinney: Will the hon. Gentleman give way?

Mr. Thomas: Neither the Government nor the official Opposition hold out any hope of either getting growth or dealing with the constraints of the period before we achieve growth imaginatively. That is the serious gap in British politics that the electorate perceives. It is the gap that the Social Democrats and Liberals will fill after the next election.

Sir Peter Mills: I welcome this opportunity to speak in the debate. It is not my usual subject, but I wish to say one or two things about which I feel strongly. I shall not go into the arguments put forward by the hon. Member for Newcastle upon Tyne, East (Mr. Thomas), but it is always interesting that both Liberals and Social Democrats have the answer and that they are not motivated by wicked activists. Is that not extraordinary? Yet those parties would find that they had the same problems that both Labour and Conservative Governments have had over the years.

Dr. Mawhinney: I am grateful to my hon. Friend for giving way. I knew that I could expect from him the courtesy of the Chamber, which was not given a moment ago. Has he noticed, as the rest of us have, that the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) forgot to mention how many billions of pounds his party intended to spend on the National Health Service above the


amount that is being spent at the moment to rectify the perceived wrongs, nor did he tell us where the money would come from?

Sir Peter Mills: I agree with my hon. Friend that the hon. Gentleman did not mention that. He passed over it. I heard that at the party conference the leader of the Liberals said, "Hold on. The Liberals and the alliance are coming. The Tories and Socialists are wicked, but leave it to us. Hold on. We are there, ready to step in."

Mr. Mike Thomas: rose—

Sir Peter Mills: With great respect to the hon. Gentleman, I shall not give way.
If the alliance came to power, it would experience exactly the same problems and difficulties as both Labour and Conservative Governments have had. I am getting to be an old man now, and I have heard debates and arguments in the House year in, year out. The first thing to remember about the National Health Service, which not many people have said, is that there is no easy solution. It is expensive in a modern State to provide an up-to-date and efficient Health Service. As a nation we need to get our priorities right if we are to care. The hallmark of a nation and of a party is that they should care. The alliance would do the House and the people a great service if it did not talk in the way that it does, saying that it has the answer, that it does not have activists, that we should hold on and that it has the solution. That is not true. It is a question of compromise all the time.

Mr. David Alton: Is the hon. Gentleman in favour of maintaining taxes at their present level or of increasing taxation to pay for our already rundown National Health Service?

Sir Peter Mills: I am not in favour of taxation being increased. There are ways in which the NHS would be made more efficient so that there is more money at the sharp end. That is important. When the economic viability of our country improves, we should get our priorities right and spend more money on areas where it is desperately needed.
I shall say a few words about our health and social services, particularly the elderly. I shall also mention the new youth training scheme for school leavers, about which I feel strongly. A Minister from the Department of Employment is not here to answer these questions. I hope that the appropriate Minister will read Hansard and give me an answer later.
There is always a need to improve and extend our health and social services, with all that that means. I am not satisfied with the way in which things are going, although I believe and understand that the Government are doing their best in difficult circumstances and in a dreadful world recession. In future perhaps we shall deal with those things more through the State or a private system or, as I would like, through care and treatment at home. That area could be extended to the benefit of patients and the taxpayer. We must be a more caring society. I am speaking in the debate to try to make that point. It is easy to be critical of the Government, but as a nation, we must care more for people in difficulty than we do at present. There is also a real danger that we have not learnt the lesson that to care is not to promise more than we can afford, is available or possible.
Most of us agree with the aims of the NHS. However, we begin to disagree when it comes to the financing of that

costly service. It is a question of resources and how much of those resources we put into the effort to help it to look after the sick and the elderly.
Despite the world recession, the Government have helped considerably. Nevertheless, I hope that when the recession ends as it will, we shall get our priorities right as a nation and help still further in areas in which there are desperate needs, as any Member must realise.
The dispute has been an extremely sorry story. I shall not blame anyone in the House today, but there has been much suffering. In a rural area in my constituency, a doctor reported to me five urgent cases of men and women in real pain because they could not go to Exeter for their operations. Whatever happens, this must not happen again. A scheme must be devised, particularly for the nurses but also for all the health workers, whereby this whole sorry business is taken out of the area of combat so that we may then move forward, because I do not believe that the nation as a whole approves of this kind of action on either side. Therefore, once the dispute is settled, as I hope it will be, let us try to find a system to ensure that this does not happen again.
I wish to make one or two local points about the Health Service. I hope that we shall be able to preserve the small hospitals in the rural areas, because I believe that they are of crucial importance. The West Country has some very large modern hospitals doing excellent work, but I hope that the Department will be keen to preserve our small hospitals, because in rural areas there are real difficulties in travelling to see relatives, and it is essential to recovery that people can have visits from their relatives.
I make no excuse for raising a constituency point. At present, we face the possible closure of the Tavistock maternity hospital. That is a serious matter. I have jokingly suggested to the people of Tavistock that the solution is to produce more children to keep the hospital going. I believe that, although the number of births has dropped, it is important to keep the hospital going. One way, perhaps would be, to find other patients for it. I hope, too, that in the West Country, as elsewhere, improvements will continue to be made not just to the big hospitals but to the local cottage hospitals which I believe are so important.
The retired and elderly population in the South-West is very large and growing rapidly. Staggering numbers of elderly people are expected to come to the West Country in the next 10 years. Although we welcome them—I am also reaching retirement age—there is already a tremendous strain on the existing services. I hope that the Government will bear that in mind in the allocation of funds to particular areas. We shall need to continue to make special provision for these people. I hope that when the economy improves, the local authorities struggling to cope with the ever-increasing numbers will be given extra resources to do so.
I also welcome the extension of new private homes for the elderly. Many of them are excellent, but I believe that there are dangers in this scheme and that some further control is needed. I heard a hint from my hon. and learned Friend the Minister for Health that further control over private nursing and residential homes may be included in new legislation. Certainly, there seems to be a rapid growth in the number of such homes, and I believe that the matter needs careful watching.
There is also a need for more chiropodists. I do not know whether this is true of the towns and cities, but in


the rural areas there is a great shortage. As we have more and more elderly and retired people, who may have difficulties with their feet, it is important that the chiropody service be encouraged. Certainly there is a shortage of chiropodists in the West Country. I hope that the Minister will see what can be done.
We also need more physiotherapists—certainly in rural areas. People have to travel great distances to Plymouth, Exeter or Barnstaple for physiotherapy. We need more of these skilled people locally to help with the large number of patients.
Finally, I wish to make two important points about youth training. Many of the training schemes are excellent, although I should like to see more co-ordination in these matters, but youngsters in rural areas have difficulty in obtaining the benefits of the courses because of the distance that they have to travel. Only last week I was talking to two young people from the small market town of Halsworthy in my constituency. When I asked why they did not take advantage of the Government training schemes, they said that it was impossible because they had no means of getting to Barnstaple, Plymouth or Exeter. Buses are infrequent and they certainly could not afford a motor bike or small car. I hope that the Government will give careful attention to this matter. Training should be available not only in the big towns and cities. The young and the unemployed in rural areas should have the same advantages and possibilities as those in large towns and cities. Something is wrong here and it should be investigated carefully.
According to my local newspaper, some areas miss out completely on the training schemes provided for local youngsters by the Manpower Services Commission. In areas such as Tavistock, the facilities do not exist. It is all very well for the Manpower Services Commission to say that youngsters should go to Plymouth, Exeter, Barnstable or some other town, but travelling costs money. As a result, young people are missing out. I hope that my hon. and learned Friend will bring that problem to the attention of the appropriate Minister so that it can be dealt with.
I am grateful to have been given this opportunity to speak. I hope that I have not delayed the House unduly. The few points that I have made reflect the serious concern that is felt in my constituency.

Mr. William Hamilton: The Gracious Speech refers to the introduction of mental health legislation for Scotland. As this will probably be non-controversial in the party political sense, I hope that the new procedure whereby the Committee may examine and take oral evidence from interested persons and organisations prior to its discussion of the Bill will be adopted in this case. I think that it would be the first time that this had been done with a Scottish Bill, so the Minister has the chance—it does not come to him often—to make history.
In his opening remarks on the Gracious Speech, my right hon. Friend the Leader of the Opposition took up two full columns of Hansard in dealing with the future of the Health Service. In the Prime Minister's reply, however, the same subject took up less than one line. She said nothing about the Think Tank report which caused so much disturbance and controversy throughout the country.

I hope that the Minister for Health will repeat the assurance given by the Prime Minister when she said that the National Health Service was safe in her hands. The Prime Minister should not be surprised that we do not believe her. Such an assurance is about as credible as the train robbers saying that the Bank of England would be safe in their hands.
At the Scottish Tory Party conference in Perth on 8 May 1981, the Prime Minister gave some evidence of her attitude to the Welfare State. I have the Tory Party handout of her speech. She said:
More than thirty years have passed since the post-war creation of the welfare state.
We all have a duty to help others … Yet there is also an insidious danger about the welfare state … It is that we offload upon the state our obligations as good neighbours … The State can provide X-rays, the blackboards and the underfloor heating. It can't provide an ever present human ear to listen or a human voice to comfort and console.
One can imagine tears rolling down those marbled cheeks as she said that. That is exactly what the nurses in the NHS hospitals provide for 24 hours a day, 365 days a year. What a load of rubbish the right hon. Lady spoke. What demagogic claptrap and nonsense. The service is being denied the resources that it desperately needs. That is why NHS staff are in revolt and why morale in the NHS is at an all-time low.
As a test of the Prime Minister's truthfulness and sincerity in her claim that the NHS is safe in her hands, let the Minister today give a categorical assurance about the future of the cancer screening unit at the Royal Marsden hospital. The decision is his—he took it out of the hands of the local health authority. He must know that it requires only £100,000 a year to run the unit, and that each year 10,000 women have breast cancer screening at a cost of £10 a head. The health authority is threatening to close the unit because it cannot provide that £100,000. One in every 17 women is likely to have breast cancer, so early screening is invaluable. Lives can be saved and anxiety can be alleviated. Yet the clinic is threatened with closure because of a shortage of resources.
At the same time, the Government can find £1,600 million for the Falkland Islands fiasco—and the bill is not yet complete. I was chided a few weeks ago when I said that the bill would run to thousands of millions. I was told that it would be £500 million. By the end of the day it will be more than £2,000 million. Every year from now those who were wounded and maimed in the war will receive pensions and allowances. That could continue for 40, 50 or 60 years. So let not the Government say that resources are not available to keep open the cancer screening unit.
Funds are needed for a hospital in Leeds. A recent report in The Guardian said that babies in need of heart treatment were in danger of dying. If they do, it will be at the hands of the Government. The hospital cannot afford to employ nurses to give the children intensive care, and they are likely to die. Let not the Government talk about the lack of resources when we are spending the equivalent of £1 million per head for every man, woman and child in the Falkland Islands. Yet we cannot keep our children alive or give our women cancer screening.
The Minister and others have spoken about priorities. Of course, politics is a question of priorities, but the priorities of the Government are obscene and indefensible when seen against the background that I have described.


This afternoon the Chancellor of the Exchequer referred to an additional £80 million for the NHS. Does that include Scotland, or is it simply for England and Wales?

Mr. Kenneth Clarke: It is for England and Wales.

Mr. Hamilton: What is the figure for Scotland? An additional £80 million on the present expenditure of £12,000 million is chicken feed. It will not cater for the demographic changes taking place. The number of 75 and 80-year-olds is increasing remorselessly, and to deal with them will cost more than £80 million.

Mr. Race: The Minister did not answer my hon. Friend's question about the figure for Scotland. Page 21 of the expenditure report shows that between the budget this year and the revised plans announced today there is actually a reduction of £2 million for Scotland. There will be no increase.

Mr. Hamilton: I am glad that my hon. Friend has put that point on the record. We shall return to these matters in subsequent debates. I shall be naturally generous to the Government. The revenue from NHS charges increased from £149 million in 1978–79 to an estimated £392 million in 1982–83. Those are official figures. The Scottish figures for the same period are £11 million and £36 million. It is interesting to note that £80 million is almost exactly the figure for the increased charges imposed upon patients between 1981–82 and 1982–83. The figure for charges in 1981–82 was £320 million and for 1982–83 £392 million. Therefore, the Government are not giving any additional money—they are milking it from those who have to pay the increased charges for teeth, milk and prescriptions. The £100,000 needed for the clinic at the Royal Marsden hospital could come from those increased charges.
I hope that the Government feel proud to have starved the NHS employees into submission, as seems likely. Further humiliation will be inflicted on them next year. Is the Chancellor offering an extra ½ per cent. or 1 per cent.? It is not jam tomorrow, and still less jam today. It is probably dry bread today and margarine tomorrow.
In the Government's new earnings survey the eligibility level for family income supplement is £91·50. That is where the Government define the poverty line.

Mr. Kenneth Clarke: indicated dissent.

Mr. Hamilton: The Minister need not shake his head. That is the official figure. I presume that no one would get family income supplement unless he could prove poverty.
About 350,000 full-time NHS employees will earn a gross weekly wage below the poverty line, even with the 6 per cent. increase. The ¼ million ancillary workers would earn a basic wage below the Government's poverty line. Over three-quarters of the full-time female ancillary staff—I hope that my hon. Friend the Member for Eton and Slough (Miss Lestor) will have the opportunity to deal with this—have gross earnings of less than £90 a week, as do nearly 40 per cent. of all full-time female nurses and over half of all full-time administrative and clerical staffs.
The figures show how mean the Government are. A Tory delegate at the Brighton conference tore up a pamphlet given to him by an NHS worker. He stated that the Government would starve the NHS workers into submission. That is what is happening.

Mr. Kenneth Clarke: The hon. Gentleman is using figures that have been quoted throughout the dispute. The figure that he describes as the poverty line is the threshold

for family income supplement for the wages of the sole earner in a family comprising a married couple and two children. The staff grades he quotes include single people, women who are the second earner in a family and school leavers. A tiny number of Health Services staff qualify for family income supplement, and far more of the low paid are in the private sector.

Mr. Hamilton: Far fewer people take up family income supplement than are entitled to it, as they are ashamed of doing so or do not know about it. The Government make sure that they do not know.
Old-age pensioners will be lucky if next November they get an increase of as much as 5p in the pound. Pensions are a crucial element in the Welfare State, which uses taxpayers' money to provide health services, education, housing, social security and so on. It is a crucial way in which we redistribute the national wealth. The Government seek to dismantle the system. They do not believe that we should redistribute national wealth in that way.
The hon. Members for Peterborough (Dr. Mawhinney), for Devon, West (Sir P. Mills) and others asked where the money is to come from. The Prime Minister and the Secretary of State for Defence repeatedly said that, irrespective of the cost, we should go ahead with the Falkland Islands war. I say again that there should be the same commitment to the NHS. The Labour Party will bring the service back to the original concept of a service which is free to all who require it. We shall get the money even if it means cutting back on the vastly increased defence expenditure to which the Government are committed.

Viscount Cranborne: I have listened to the debate with considerable interest, because it is not a subject in which I usually take a specialist interest. However, it defeats me how the Labour Party can manage to emerge from the debate with such an extraordinary amount of righteous indignation, remembering as I do the long waiting lists that were left when the Conservative Government took power in 1979 and which, before the current dispute, they had succeeded in reducing substantially.
I shall do a disservice to hon. Members who have taken part in the debate, because I shall not address the burden of my remarks to the subject of the NHS. Rather I shall follow the example of the right hon. Member for Down, South (Mr. Powell) for a reason that may not appeal to other hon. Members who are present. I ask them to excuse me, because there is no apparent place where it would be suitable for those who feel strongly about the Northern Ireland Act to introduce remarks that are relevant to the paragraph on that subject in the Gracious Speech. I therefore crave the indulgence of hon. Members if I try to set on the record my feelings about what happened during the elections to the Assembly.
My right hon. Friend the Secretary of State for Northern Ireland believes implicitly that what he attempted to do was the only course open to him. I have never doubted that for a second. During our lengthy debates which you, Mr. Deputy Speaker, so ably chaired, more often than not at an early hour of the morning, my right hon. Friend used two arguments to convince Conservative Members than. his Act was worth trying. The first was that the economic


condition of the Province was so bad and was deteriorating so rapidly that something radical had to be tried. The second argument was that because of the nature of the rolling devolution—proposed by my right hon. Friend, even if it failed, no great harm would be done.
As in all things, I listen with great care and respect to what my right hon. Friend tells me. Then I was sceptical to say the least, and I am even more sceptical now about the justice of what he argued. The principle of rolling devolution as presented to us was that devolved government could work only if the other community in Northern Ireland—the Roman Catholic community—could be given a share in the government of the Province. However, the principal party representing the nationalist faction in Northern Ireland has refused even to sit in the Assembly. It therefore follows that the Assembly is a dead duck, even on the criteria put forward by my right hon. Friend, before it starts.
That goes to show that my hon. Friends and myself, to say nothing of the right hon. Member for Down, South, were on that ground alone all too right to express our fears during the summer, but there were other reasons why we felt that the Act would do far more harm than my right hon. Friend could possibly suspect. One reason why we felt that was that, contrary to what my right hon. Friend maintained, even if the Act succeeded in creating an Assembly, it would undermine the Union. There are members of the Labour Party to whom the undermining of the Union would not matter. The hon. Member for Stockport, North (Mr. Bennett) hinted as much when he attempted to reply to the right hon. Member for Down, South.
We can all bandy statistics and argue whether violence has increased because of the elections held last month. I believe that violence has increased substantially because of the Northern Ireland Act. Judging from a television interview with Mr. Brian Walden in which the Secretary of State appeared with his usual aplomb, I suspect that the Secretary of State would admit exactly the same thing. The distinguished interviewer taxed my right hon. Friend with the accusation that the increase in violence was directly connected with the elections to the Assembly. What struck me forcefully was that the Secretary of State should deny the accusation so absolutely.
The Secretary of State is right to tell us what he believes, and if he tells us that there is no connections between the elections and increased violence in the Province, I am certain that he believes that with all his heart, but I cannot go that far with him. It is self-evident that the monstrous crimes that occurred—the tortures, beatings and mutilations that surrounded the elections—took place directly as a consequence of the elections. My right hon. Friend does not believe that what we have sadly come to see as typical Irish violence was on that occasion a consequence of the elections.
Many of my hon. Friends who oppose the Bill have suggested the "Strathclyde" solution to the Province's troubles—a form of local elections. It could be argued, as it has been argued to me in private that such local elections—and, indeed, any elections in Northern Ireland—would also attract violence. Surely we must exercise judgment.
I cannot follow the Secretary of State in believing that his Assembly proposals have any chance whatever of

success. I did not believe in the proposals before the Assembly elections, and I have been reinforced in my belief by the events of the past few weeks. I believe in his proposals still less today.
What worries me is that in the same interview with Mr. Walden my right hon. Friend said that he intended to pursue his policy as he intended to do before, in spite of the undertaking from the SDLP that it would not take its seats in the Assembly. The Secretary of State may think that the Assembly can work in spite of obstruction from the very elements that make up the power sharing that he feels to be so essential. I find it difficult to believe that he thinks so.
We may even ignore my first two doubts and concentrate on the increase in violence alone. My right hon. Friend will forgive me when I say that I do not believe what he believes about the future efficacy of his policy. I earnestly beg him to reverse the Act before things get even worse. I am not beseeching the Secretary of State alone. It is not just my right hon. Friend's policy; it is the policy of the entire Government.
The Prime Minister is, as we know, a firm supporter of the principle of collective responsibility of the Cabinet.

Mrs. Dunwoody: You could have fooled me.

Viscount Cranborne: The hon. Lady says that I could have fooled her. I would not dream of trying to fool the hon. Lady. That would be beyond even my ambition. However, I should like to illustrate what I am saying by a quotation from the Prime Minister, delivered with her characteristic verve. In answer to the right hon. Member for Ebbw Vale (Mr. Foot), she said that
in Government we believe in working as a team.
There was then an interruption. My right hon. Friend went on:
That is what the doctrine of collective responsibility means, alien as it may seem to Labour Members who, when they were in power, had to have special dispensation from collective responsibility. "—[Official Report, 19 May 1981; Vol. 5, c. 151.]
The Prime Minister makes a great virtue—and rightly so—of consistency. Therefore, I assume that in the matter of the operation of the Northern Ireland Act 1982 she feels as strongly about collective responsibility, where it affects the policy on Northern Ireland—in which the Secretary of State is her strong and shining sword—as she does in other matters.
As I beseech the Secretary of State to think again whether the consequences of his policy will be the putting at risk of additional lives, not only of Ulstermen but of British Service men, I must also make that request of the Prime Minister. I make it particularly because she more than any other Minister has shown herself to be fully conscious of the horrors undergone by British troops in Ulster. She has earned the admiration of hon. Members on both sides of the House for the courage she has displayed in visiting Ulster and for her feeling for the troops in the difficult job they perform.
The Secretary of State is well aware that the soldiers, as they go about their duty in Ulster, do not question the right of politicians to send them there. They undertake cheerfully and professionally the duties they perform. It is surely right that politicians, in return, before they ask those troops to undertake such arduous and dangerous duties, should reduce rather than increase the risks that the troops are likely to run, in the furtherance of a policy that has no possible chance of success.


If the policy had some chance of success, it might be right to run the risk of increasing the danger, but we have a bankrupt policy arising from a bankrupt idea. In the politics of Ulster—in which, I am sorry to say, I am not the leading expert—we are not dancing the conventional minuet of Westminster life. We are in the world of the gunman and the flayer. If my right hon. Friends, collectively responsible as they are for the policy that is even now fading before our very eyes, can have the breadth of vision to think again, they will have rendered a great service to all of those who have friends and allies in the security forces in Ulster.

Several Hon. Members: rose—

Mr. Deputy Speaker Mr. Bernard Weatherill: Order. Before calling the next speaker, I remind the House that the wind-up speeches are due to begin at 9.10 pm. Five hon. Members still wish to take part in the debate. If they bear that in mind, I shall be able to call them all.

Miss Joan Lestor: I shall not pursue the comments of the hon. Member for Dorset, South (Viscount Cranbourne), because I wish to return to the subject of the Welfare State.
The hon. Member for Beaconsfield (Mr. Smith) said that when prescription charges went up, demand fell. He seemed to imply that people had been getting prescriptions that they did not need. The fact is that we are getting into a situation in which there are many goods that people would like to have, but which they cannot afford.
When prescription charges were increased, a chemist interviewed on Radio 4 said that people were coming to him with prescriptions that cost far more than the medicines that they were being prescribed. He said that he would recommend them to buy a bottle of patent medicine and to ignore the prescription. No one can sustain the argument that if demand went down when prescription charges were increased, it was because people had been obtaining prescriptions that they did not need. Such a suggestion is also a reflection on the medical profession.
I thank my hon. Friend the Member for Fife, Central (Mr. Hamilton) for referring to the cancer diagnostic unit at the Royal Marsden hospital. As Opposition spokes-person on women's rights, I have, as hon. Members would expect, received many letters on the matter. The figures have been given, but it is important to remember that 12,000 women die of cancer of the breast every year and the unit at the Royal Marsden hospital detects cancer of the breast at double the rate of any other similar unit in this country. In other words, it can detect cancer faster and, therefore, give the women involved a greater chance of being saved.
I hope that the Minister for Health, who is responsible for what is to happen to the unit, is listening carefully. As one woman wrote to me recently, if parts of men's anatomy suffered from cancer in the same way as do parts of women's anatomy, perhaps a male-dominated House of Commons would be a little more sympathetic about the possible deaths of women as a result of the closure of the unit.

Mr. Mike Thomas: Will the hon. Lady give way?

Miss Lestor: No. There is not enough time.
I welcome the reference in the Queen's Speech to equal pay. However, there is another side to the question of

women and the welfare and social services. As long ago as 1950, Peter Townsend pointed out that the system of family care in this country was organised around female relatives, particularly daughters. In 1978, and again recently, the Equal Opportunities Commission has repeated that statement and said that there are three times as many women as men caring for elderly, handicapped relatives.
When a Government cut social services, they cut the social wage of the country. It is not sufficient to look at how wages have risen or fallen. When the social wage and services are cut, that represents a cut in people's wages, because the services are taken away and the burden falls on certain sections of the community. The current lack of services results in a dramatic increase in the burden on women.
Many women are being forced to give up jobs so that they can provide for members of the family the care that the Welfare State is no longer able to provide. It is interesting that although there is a growing demand on women to provide services, as the Government force local authorities to restrict spending, the invalid care allowance is not payable to married or cohabiting women. Yet the Government expect those women—indeed, they rely upon them—to provide those services. The Government rely on those women to supply the provision that is no longer available. Yet the same women are denied or robbed of the financial assistance that would enable them to make that provision properly. This is a matter that the Government must consider when they talk of any further restrictions on services. Women are losing their jobs and therefore the income that that they need to make adequate provision. They are denied the financial compensation that they need.
According to figures published recently by the Equal Opportunities Commission half of all married women are still working, although job losses among women are escalating dramatically. Two-thirds of women in the 35 to 54 year age group—those most likely to have to care for relatives because of lack of provision—are at work. They will be increasingly called upon to give up their jobs so that they can look after relatives and others for whom local authorities can no longer make provision.
The Disability Alliance has shown how the provision of home helps no longer keeps pace with the number of people who need the service. This is also happening with meals on wheels and other services. The number of people aged over 75, the main users of the home help service, has increased twice as fast as the service itself. The same applies to the meals service. The Social Services Select Committee, in its examination of facilities for the elderly, found insufficient growth to meet the demands for day care. That provision in relation to the size of the population aged over 75 has fallen since 1978–79.
A document made available to hon. Members—"Crisis or Challenge"—predicts that in the year 2001—not very far away—there will be an additional 493,000 people in this country aged over 75 and a 52 per cent. increase in the number of people aged over 85. Many will be housebound or confined to their beds. Their care will fall on the community, which means women. It is women who will be forced increasingly to take on the duties that the community cannot provide. This stems in many instances from long-term neglect in planning for the future. We are failing to take account of the fact that the population is increasingly becoming older.


Only 24 per cent. of day care for young children of pre-school age is provided by local authorities. The rest is provided by child minders, relatives and a variety of forms of private care. In some local authority areas, there are 500 pre-school children on the waiting list for day nurseries. A report has, I believe, been submitted to the Department of Health and Social Security pointing to inadequacies in some child-minding services. I understand that about one-third of private child minders do not match the standards laid down by the Department. This means trouble and misery and lack of proper provision for children in future.
In addition to this lack of care for pre-school children, the work availability test is coming into operation. The major impact will be felt by women. They will be asked what provision they have made for the care of their children if they say that they are available for work. Yet the Government are taking away the provision for the care of the pre-school child.
The lack of planning, the lack of intelligence to take on board what is happening to elderly people and young children, and the way that the burden is falling on women will take away much of my pleasure in seeing that the Government will honour the Equal Pay Act in full. Women will continue to be discriminated against because they will be forced back into the home to do the job that the Government and the local authorities should be doing.

Mr. David Alton: This afternoon the Secretary of State for Social Services spoke in passing about the Health Service in Liverpool. The right hon. Gentleman owes it to the people of Liverpool, particularly those working in the Sefton General hospital, the Newsham General hospital and the Princess Park hospital to tell them what will be done in those hospitals in the future. The major concern of those people is the uncertainty of the future of the hospitals. For example, far from there being the suggested under-demand in the surgical wards in the Sefton General hospital, there is a long list of elderly people awaiting operations. If that hospital or those wards were to be closed, the only alternative place for them to go would be the New Royal hospital. That hospital assures me that there are too many people on its waiting list, and it cannot provide for those people either. I hope that the Minister deals with this point.
Most hon. Members today have spoken about the future of the Welfare State. I thought that it would be interesting to look back on the words of Sir William Beveridge when he made his maiden speech in the House in November 1944. He echoed the words of David Lloyd George some 25 years before when he said that it was the duty of Governments to make Britain a land in which
indolence alone shall suffer want." [Official Report, 3 Nov. 1944; Vol. 404, c. 1133.]
It was interesting to hear the ghost of Beveridge raised by the hon. Members for Pontypridd (Mr. John) and for Newcastle upon Tyne, East (Mr. Thomas).
Some 38 years later, it seems as though some politicians wish to put the clock back to a time before the Beveridge proposals were implemented by the Attlee Government, and back to the time before the breakwaters against want were erected by the great Liberal Governments of 1906 to 1914. Beveridge insisted that the

six giant evils—want, squalor, disease, ignorance, idleness and war—were six needless scandals. In his report he concluded
want is a needless scandal, due to not taking the trouble to prevent it.
However, 38 years later, we are seeing the re-emergence of those giants.
The Prime Minister and her friends say that it is not their intention to dismantle the Welfare State. However, in many ways that is already happening. If the Welfare State is not being dismantled, it is certainly being done a great deal of damage. The secret report that was circulated on 7 September this year, and which was widely publicised in The Economist the week after, made it clear that there is a philosophy and a strategy favoured by many members of the Government that would do irrepairable damage to the Welfare State.
The Economist said that the most controversial suggestion was that to end funding for all institutions of higher education. In many ways, that is already happening. This year alone, about 90,000 students have been turned away from colleges, polytechnics and universities. Professor Ralph Dahrendorf estimates that it costs £3,000 a year to keep a student at the London School of Economics, plus £1,600 a year for grants. That is less than the cost estimated by the Treasury for keeping someone on the dole queue. However, 90,000 people have been turned away this year, with 160,000 students scrambling for 70,000 available places. Since 1980, applications to universities have gone up by 10 per cent., but the number of places has been cut by 9 per cent. The prospects for the 90,000 who have been turned away are grim. They will probably join the other 300,000 18-year-olds who are languishing on the dole queue.
We should consider the 5 per cent. cut in unemployment benefit, to be implemented later this month, and the introduction of the unified housing benefit. The new housing benefit will mean that the two million lowest wage-earners will be 75p a week poorer. That reinforces poverty and raises the spectre of the "Why work?" syndrome. About 5·5 million people, 20 per cent. of the work force, are now at risk from the poverty trap. As to linking benefits with inflation, between 1978 and 1982 prices have risen by 61·5 per cent., earnings by 71·8 per cent. and unemployment benefit by only 58·7 per cent. Between April 1978 and November 1982, child benefit—about which the Conservative Party manifesto went on ad nauseam—rose by 46·3 per cent., yet prices are likely to have risen by 52·6 per cent. and earnings by 61·8 per cent. By next April, about £2 billion will have been cut from the social security budget. The result will be that unemployment benefit for a two-child family will have fallen from 51 per cent. to 41 per cent. of average earnings between 1976 and 1981. It is now at its lowest level relative to net earnings for more than 20 years.
The Think Tank report went on to suggest that the National Health Service should be replaced by private health insurance. That would inevitably hit the more vulnerable citizens the hardest. If the measures contained in that secret report are implemented openly or not and many of those insidious cuts are already happening, the clock will be turned back to before the Education Act 1944, the National Health Service Act 1946, the Beveridge report and much further. The challenge to the House is to create a good society with the right balance between intervention by the State and the creation of


sufficient room for economic and social freedom and responsibility. The balance between State and society advocated by Liberals is not a compromise between Socialism and Conservatism. The Liberal conviction is that our problems can be solved only by as much freedom as possible. This must be attained by all human beings. Self-reliance comes first, but Liberals also believe that it is a Government's duty to assist those in need. That is why there must be a series of measures to help those most in need in order to maintain the Welfare State.
There must be help for the unemployed. At present, it costs an inordinate amount of public resources to keep 3 million people in the dole queue. It is estimated that it costs about £15 billion, which means £5,000 for each person in the dole queue. Each working family must contribute £1,000 towards that. On Merseyside alone, the cost of unemployment to the Exchequer is £778 million. That is a tremendous waste of resources and a ludicrous way of trying to lubricate the economy. Surely it would be better to use those resources to create genuine employment. That will reduce reliance on the State and will do something about the crumbling infrastructure as well. One matter worthy of attention is the 500,000 homes in Britain that still do not have an inside toilet or bathroom or running hot water. Something must be done about the conditions of the elderly. As the hon. Member for Eton and Slough (Miss Lestor) said, it is ludicrous that the meals provided for the elderly failed by 6·7 per cent. to meet needs this year. Day care places were reduced in proportion to the increase in 75-year-olds and the number of home help hours worked failed to keep pace by 8 per cent.
The touchstone of a civilised society is how it treats those who are most at risk. A country that cannot show concern for its most vulnerable citizens—the poor, the aged, the unemployed and the sick—becomes a sick society. That is why we should resist any attempt to erode the Welfare State.

Dr. Brian Mawhinney: It is ironic that we should be discussing plans to dismantle the Welfare State. There was no suggestion in the late 1970s under the Labour Government that when they ran into economic difficulties they would dismantle the Welfare State. Nor does that apply today.
During the past decade, two factors have contributed to the dismantling of the Welfare State more than anything. The first involved the activities of Mrs. Barbara Castle. I mention one activity in particular—trying to separate private beds from the National Health Service. The consequence of that, which no one foresaw at the time, was a splitting of the Health Service so that the medical help that was available in the NHS was reduced, and—even worse—the resources which came from the private beds to the NHS were taken away. Today many district health authorities face the consequences of that ideological political activity. In Peterborough alone, where a new private hospital is now being built, which I welcome, the consequence of closing the private beds in the district hospital is £400,000 a year which will not be available to the Health Service. It may eventually cause the closure of beds in that hospital. That does not help in resolving the economic difficulties now facing the NHS.
The second thing which has gone far to dismantle—if dismantle is the right word—the welfare services over the

past decade has been the attempt by some people, led by right hon. and hon. Labour Members—I hasten to add, not those now sitting on the Opposition Front Bench—to politicise the health unions, to take away the aspect of caring from the Health Service, and to substitute a political battleground. It is an attempt to politicise the people working in the Health Service, for the creation of jobs and political ideology, instead of concern for patients. One thing could be done to protect the Welfare State in the years that lie ahead, and that would be for all parties to commit themselves to depoliticise the Health Service, take politics out of the unions, particularly the union which sponsors the hon. Member for Wood Green (Mr. Race), NUPE, and to reassert patient care as the central core of the Health Service.
I do not want to indulge in theoretical discussion. I want to make a few practical points, all of which concern who actually spends the money in the Health Service. I suggest that the money is spent by three groups. First, there are those who are responsible for administering the Health Service locally. My hon. Friend the Member for Beaconsfield (Mr. Smith) spoke of the growth in real terms of the Health Service funding over the more than 30 years of its existence. It is an incontrovertible fact that for roughly the same number of NHS bed patients per year being treated now as were treated 20 years ago, the number of staff treating them has trebled. It is true that staff now work shorter hours, and that as they provide a 24-hour service more staff are needed. It is also true that as technology and medical knowledge advance more services are available now than were available 20 years ago. However, the suspicion persists that manpower utilisation in the Health Service locally is not as effective or as well controlled as it could be.
My right hon. Friend the Secretary of State and my hon. and learned Friend the Minister for Health talk about how many more people are employed in the NHS now than were employed in 1979. I view that with some trepidation. The time has come for us to look at manpower control in the NHS, not simply to get rid of people but to provide a better service within the resources that are available.
The other issue that I wish to raise concerns something that has emerged in my health district, largely at the instigation of the unions—to which I give credit, because in Peterborough we are fortunate in having both a good locally administered Health Service and a co-operative union structure. The cost of everything spent in the NHS in the hospital in Peterborough is now computerised. Union leaders have made available information on individual costs to people working in the hospital—for the first time. People never knew before what a catheter cost. They never knew that there were two or three different types of catheters, each of which does the job, but one of which costs half or a quarter the price of the other.
The people working in the hospital are now taking the lead and saying, "Let us choose the less expensive item of equipment if it does the job." I wish that that could be replicated throughout Britain because it would provide savings which in turn could be devoted to health care . At the same time, it would give people working in the service and the unions a feeling that they were contributing positively in economic terms as well as to health care. We must find ways to make that applicable.
The second group of people who spend money in the Health Service are the doctors. I make no apology for saying that the record of all Governments over the past 35


years in dealing with the medical profession is not one with which any Government can be well pleased. The doctors are winning hands down. They institute the spending. It is they who write the piece of paper which involves all other services and their spending. Government must come face to face with that problem.
My views are already on the record. I regret that we lost yet another round to the consultants over their contracts. They would have been much more willing to listen to reason if those contracts had been held at district health authority level, but we have lost that battle. Until a more determined emphasis on physical diagnosis is applied to doctors in place of this scattering and battery of tests which they can call upon, in many cases simply to save them doing a thorough physical diagnosis themselves, expenditure will be out of control.
The same applies to drug prescribing. Many drugs would be just as effective at a half or a quarter of the cost of a physician's favourite drug. "Clinical judgment" is a catchphrase in the Health Service which covers a multitude of sins. Until my right hon. and hon. Friends on the Government Front Bench come to terms with the fact that doctors will use clinical judgment to get away from making hard and responsible decisions on some—not all—occasions, there is a source of expenditure within the Health Service which Ministers and the House cannot control.
We can make the Health Service more efficient, we can make it more cost-effective, but we cannot do that for ever at the expense of the paramedics and the ancillary workers. We must tackle the medical profession as well.
That takes me to the third group which spends money, and that is the Government. I welcome what my right hon. Friend the Minister said about the increase in expenditure and the extra money that has been made available to meet the wages bill. I know that that will be welcomed also by the district health authorities. I also welcome the commitment to the elderly that he has announced.
It is a matter of some sadness that we are not yet tackling with the necessary determination and verve the question of the prevention of illness. If we are just to talk in money terms and no other, it would be cost-effective to spend more money trying to prevent illness than trying to cure it once it has occurred. I commend to my right hon. Friend a determined look at the prevention of disease and illness.
I return to the question raised by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) about RAWP. He was wrong in one respect. East Anglia is another region in Britain where there is an increasing population. We face desperately the difficulties of a provision which is lagging behind population numbers. I speak with some passion because it is my constituency, perhaps foremost in the whole of East Anglia, that is suffering. Peterborough is a new town development area. People are coming in and provision is being made, but it is lagging behind the population.
I am not complaining about the regional health authority. It is sympathetic and I pay tribute to Sir Arthur South, who is not of my political persuasion yet has never let that influence him. It is doing as good a job as it can. However, Ministers must understand that it has hard

decisions to make and it is not easy for it to take money away from one part of East Anglia to give it to Peterborough off its own bat.
When the Labour Government put throught the New Towns Act in the late 1960s, they included a provision whereby the development corporation could provide houses, industry, schools, leisure facilities, roads, infrastructure and everything else except health. The Labour Government bear a heavy responsibility. They lagged behind in the provision of health in my constituency while they were in office, and my right hon. and hon. Friends now are having to pick up the bill. I applaud what they have done for Peterborough, but I ask them to look again at the problem of providing for areas where the population is rising very quickly. We have considerable problems, and we need their help within the overall framework, which I support, to see us through the next few years.

Mrs. Gwyneth Dunwoody: The phrase in the Gracious Speech about the National Health Service is that the present Government intend to introduce legislation
to enable improvements to be made to the health and social services.
I find it difficult to recognise the word "improve" in the statements that we have heard today from both the Secretary of State and the Chancellor of the Exchequer. It is quite impossible to talk about improving either the NHS or the social services in general unless the Government are prepared to spell out whether they intend to commit resources to them this year and next year.
The Prime Minister would like us to believe that the NHS is safe with the present Government, but the Think Tank report has only been shelved. If that is the truth, we can look at what has happened to the NHS, especially over the past three years, to understand what the Government mean by improving health facilities.
Earlier in the debate, my hon. Friend the Member for Pontypridd (Mr. John) said that there had been a direct cut in the money available to the NHS. His assertion was greeted with much mirth by Government supporters because, we were told, there had been an increase in the amount of money available. When my hon. Friend said that there had been a cut of £142 million, this was regarded as being a figure that he had just taken out of the air.
Perhaps I may spend a few moments examining what has happened, as opposed to what Ministers might like us to think has happened.
It is no use calling a cut by some other word. Whether it is applied to the NHS or to social security benefits, a cut is a cut. It deprives patients of the standard of care that they need, it deprives those on benefit of the amount of money that makes their lives barely tolerable, or it deprives those desperately in need of specialist services of the high quality care that they need in the acute sector.
I underline exactly what has happened to NHS finance. In January of this year, in a totally arbitrary manner and without any attempt to delineate the areas of which they were speaking or to pinpoint specific services, the Government announced what they termed an efficiency cut of £17 million right across the NHS.
In March, when the Government were talking about the present pay offer, they made it clear that, unlike previous Governments, they had no intention of providing all the cash. They intended to make sure that the regional health


authorities provided at least one-third of the money and that the Government would be responsible only for the rest. They were then talking about a deduction of £27 million from the regional health authorities.
In April, the Government reduced the national insurance surcharge to private industry but said that no one in the nationalised industries, and certainly not the NHS, could possibly benefit from it. Although the NHS had to continue, it got a drop in the amount that it was paid. In fact, £58 million was taken out of its budget—[Interruption] . All these amounts could have gone into the NHS budget. What happened was that the money was taken away from the amounts available.
The second pay offer was also made on the calculation that in this instance the regional health authorities would have to find an extra £40 million. That £40 million was on top of the commitments that they had already made half-way through their financial year. That took £142 million out of the NHS budget. Its effects have been seen throughout the country.
In the previous debate on the NHS I mentioned that many heavily used specialist services were at risk. I was told that I was exaggerating dreadfully and that there could be no question of any cuts in service. Yet the Royal Marsden hospital, which has been used by 10,000 women, is closing its screening facilities, and Tadworth Court hospital, which provides facilities for terminally ill children—it appears that the Secretary of State is not interested in hospitals that provide facilities for terminally ill children—have been put at risk by the effect on the NHS budget.
The Government's response is that in special cases—for example, Great Ormond Street hospital or the Royal Marsden—they will examine some means of providing a once-for-all payment or taking responsibility away from the regional health authority. Yet the Minister made it clear to me that next year four regional health authorities will be in deficit for the first time and others will find it exceedingly difficult to meet their existing budgets.
In a written answer on 5 July the Minister made it clear that North-West Thames will grow by minus 0·41 per cent. In other words, there will be a direct cut. North-East Thames will be cut by 0·34 per cent., South-East Thames by 0·36 per cent. and South-West Thames by 0·27 per cent. Mersey, of which the Secretary of State spoke, will be so badly affected that it will be unable to provide many of its services.
The hospitals of which we have spoken will not be alone in finding it impossible to continue to provide services next year. St. Mark's hospital is world renowned for its high quality surgery. Like many postgraduate centres, it is funded not as an independent unit but by the district health authority. It has now been told that the authority faces appalling problems.
Some time ago, the Government announced that they were putting a freeze on hospital building. No regional health authority was allowed to go ahead with any plans unless it could guarantee to find the necessary money to run the new building. That might sound a reasonable assumption, but the Government must know that, on their existing budgets, many regions, especially the Thames regions, will not be able to maintain their existing services. Therefore, the area that is normally required to provide money for St. Marks has said that, to open a new hospital that is desperately needed in the East end of

London, it may have to contemplate closing not only St. Mark's but one other specialist unit. If one disperses specialist knowledge from a hospital, such as St. Mark's, closes down 95 beds and, in exchange, offers 5 beds somewhere else, one deprives not only the population of that area but those who suffer from major diseases elsewhere who are frequently referred to St. Mark's for the type of care that can make the difference between life and death.

Mr. Kenneth Clarke: I understand that the district health authority has floated a document that suggests the possibility of closing St. Mark's. Nevertheless, I assure the hon. Lady that there is no question of the regional health authority or the Government contemplating closure of specialist facilities in that hospital. It is as much of a red herring as many of the other scare stories that she is propounding.

Mrs. Dunwoody: The Minister will not get away with that. He knows that all the RHAs that have had direct cuts in their budgets must look at expenditure and save wherever possible. If they must make savings, they can do so only by cutting the facilities that are available for patients. The hon. and learned Gentleman's figures made that clear. His statements put the RHAs in that situation.
Some Conservative Members seem to think that the problem could be solved if the NHS could have a form of accounting similar to the system in private industry. The Government are proud of telling us that they foresee a partnership between private medicine and the NHS. Whether we look at the percentage of GDP spent on the NHS or at the cost of administration using OECD figures, we get extraordinarily good value from the NHS. Not only do we spend less than countries such as America, but we spend less on administering the services that we provide. If we were to imagine for a wild moment that private medicine could in any way replace the facilities of the NHS, we should look at what has happened to the private sector under the aegis of the present Government, who have done everything possible to encourage it.
The Sunday Telegraph states:
If the National Health Service is sick, its vital partner … private medicine, is not immune and showing worrying signs of commercial malaise.
In medical insurance the growth is there, but profits are being squeezed by ever-rising administration costs and the hospital and medical charges paid out in benefits.
That newspaper also states that
excessive charges by the independent, profit-motivated hospital developers and by suppliers of drugs and services have caused the cost of benefits to escalate. This, combined with an unexpected rise in claims, could spell financial trouble—unless rates increase substantially.
In other words, the private sector, the NHS's much vaunted "partner", is not only unable to deal with any rise in the amount of work that it has to do, but it now admits that its expenditure is rising because its administrative costs are much higher and that it is finding it difficult to deal with those who require a great deal of patient care.
In spite of all that, I welcome the small amount of money that is referred to in the paper published by the Government today. However, I ask the Minister to tell us what that means. We were told that the present pay dispute would mean that the RHAs would have to find substantial sums of money. Is the figure in the statement meant to be the Contingency Fund continuation? If so, how is the £80 million made up? I understand that only £58 million will


be required for England and that some other amount will be required for other regions. If so, how much will be left for the other initiatives about which the Secretary of State boasted?
Before I leave the question of the pay dispute, I should like to warn the Minister for Health. From the beginning of the dispute, he has almost gone out of his way to make it difficult for the TUC-affiliated health unions to negotiate with him. As far as one can see, when the unions have come back to the negotiating table, he has chosen not to welcome it or say that it is a positive move, but to seek in an extraordinary way to exacerbate the situation with exceedingly ill-chosen and unpleasant demands.
I do not suppose that the Minister has ever negotiated anything. When I listen to him, I am driven to think that he could not negotiate a corner on a bicycle. This evening he must make an effort to say that it was the Government's fault that the health unions were forced into industrial action, that we must now put behind us that unpleasantness and seek to find a mechanism that willl ensure that no one need ever face that difficulty again.
Conservative Members say that we should depoliticise the health unions. They should realise that those who have politicised the ancillary workers, the nurses and others in the Health Service are not the unions or Members of Parliament, but the people who, for far too long, have received appalling rates of pay and are now told that they are not worthy of any improvement. If the Minister for Health is to participate in the talks with the health unions, I hope that he will talk to them about new resources and allow them to explain to him the extent of the difficulties that they face.
The real and depressing message of the Gracious Speech, however, is that there will be no improvement either in social security or in the Health Service. The Chancellor today, in effect, said, "Wait and see." Does he know what it is like for old age pensioners, the long-term unemployed, one-parent families and those in receipt of invalidity pensions to be told that they are living so high on the hog that next year a percentage of the pittance that they receive will be taken away? Does he realise how many people will be worried by his comments today? Not many of them regard themselves as so well provided for that they can afford a direct cut in their standard of living next year. A reduction in expenditure that affects any kind of benefit can only mean even greater misery for those most in need.
It is clear that the so-called abatement—the 5 per cent. cut in unemployment benefit—will not be replaced. I should have thought that even this Government would find it difficult to tell the House that they intend to stick to that shabby little manoeuvre. To have taken 5 per cent. away from those whose only fault was to have dared to lose their employment can only be an example of the Conservatives' desire to punish rather than to improve the lot of the unemployed. There is no suggestion of any increase for the 1 million long-term unemployed. There is no suggestion of any help for those in receipt of child benefit. There is no encouragement at all. There is merely a clear statement that among the Conservative Government's priorities defence is at the top of the league while people—especially children, the sick and the old—are a very long way down. The situation that we face today is disgraceful.
Indeed, some Conservative Members found it difficult to accept the aims put to us by the Secretary of State. He told us that we must create a climate for industrial recovery. As he well knows, far from being more competitive, this country has lost its competitiveness to the extent of 35 per cent. Let him come to my constituency and see the effect of Conservative industrial policies. Let him see the state of the engineering industry, the results of the Government's refusal to allow British Rail the money for electrification and the highest number of private bankruptcies ever.
The Secretary of State said that the Government will ensure that those most in need will benefit. Presumably that does not include the unemployed, as there is absolutely no sign that they will benefit from the Government's policies in any way at all. The right hon. Gentleman's policy towards the social services and the Health Service is, in effect, to see that they look all right on the outside while they fall apart inside. He believes that the entire Health Service should be allowed to rot from the foundations upwards. That is painfully clear. The RAWP allocations, which sought to redress some of the imbalance between sections and specialties within the Health Service, have been restrained to such an extent that not only will they be unable to meet existing levels of patient care but they will be unable to replace the services that are being cut back at every level.
We need a clear plan—not to talk about moving people out of institutions into the community, but to tell local authorities that the Government will genuinely guarantee resources to help build the establishments that they need, to staff the day care units and to provide social service workers and home helps. Personal social services have been hacked to pieces by the Government. Local authorities could not plan ahead. They were told that they were overspending. Then, in the next breath, they were told that they would be penalised for underspending. When the Prime Minister had the effrontery to berate those for whom she has caused the greatest difficulty for not spending more on capital costs, my breath was taken away—[Interruption]—but not for long.
Those most affected by personal social services do not have a ready voice in the House. If the elderly are deprived of home helps, that will not necessarily show in the statistics. If a woman who has had a stroke is sent home, where there is only one relative to care for her, that will not show in the statistics. There will be no meals on wheels and there will be insufficient district nursing. If the elderly are left to live in wholly inadequate homes because we have not built enough sheltered housing, that does not show in the statistics. All that the statistics show is the misery of whole sectors of the population who have been neglected and abandoned by the Government, because to them they are not important.
We cannot continue with a Government who regard social services as an extravagance and wish to save money by bringing in accountants and turning social services over to private enterprise. The sooner the Government accept their responsibility and admit that they have no intention of either improving social services or the lot of the sick and elderly, the sooner they will have some respect. If that does not happen, the next general election cannot come soon enough for those in need.

The Minister for Health (Mr. Kenneth Clarke): The speech of the hon. Member for Crewe (Mrs. Dunwoody) was obviously aimed directly at the next general election. It was not derived from any factual basic research or analysis. Most of the needs that the hon. Member described are those that the Government are seeking to serve—and we are serving them with more effectively devoted resources than did the Labour Government.
I shall concentrate mainly on the health and social services aspect of the debate. Much as I am tempted, I regret that I shall not join in the debate on Ulster, raised by the right hon. Member for Down, South (Mr. Powell) and my hon. Friend the Member for Dorset, South (Viscount Cranbourne). Nor shall I be tempted to discuss the exchange rate and economic policies, raised by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour).
I shall touch briefly on the main theme of the debate on the Address, which is the Government's attempt to revive the economy. That must be the background to any consideration of social services. My right hon. Friend the Secretary of State pointed out that the Government's priority of reviving industry must be the context in which we put our policies on social services. There can be no competition between the social services policy and the Government's main economic policy. We have exempted social service spending and planning from the worst effects of the recession, but resources are finite until the recession has eased.
It is even more important for hon. Members to realise that reducing the appalling level of inflation has direct benefits for the Health Service, the personal social services and social security programmes. It is absolute humbug for Opposition Members to say that they can answer the problems of the social services by expending extraordinary sums which they know they can only raise in a way that would put up inflation and do great damage to the country's social fabric and to the programmes that we are talking about.
The main aim of our policy is to reduce inflation and produce a more secure base on which to strengthen our social services. But even in the short term the Government's success in reducing inflation over the past few months has brought direct benefits to our social services policies.
In the course of the past financial year the finances of the Health Service have benefited substantially from the fact that inflation has fallen much faster than most people expected and the health authorities had budgeted for. The additional fall is probably worth at least £40 million to the Health Service this year. New Society recently estimated the figure at £50 million. We shall not know until the end of the financial year. But the Government's success in reducing inflation has gone a long way to mitigate the contributions to meeting the pay settlement and so on.
There has also been a direct benefit to pensioners and others. The Government have reduced inflation well below the level anticipated when this year's uprating was first announced. The problem that so exercised the hon. Member for Pontypridd (Mr. John) arises from the fact that the uprating this month will be 11 per cent. for all beneficiaries. That is much higher than the expectations of inflation when the year began. Pensioners are among the

first and most direct beneficiaries of the Government's success. For the next year the pensions increase will be well ahead of the predicted inflation level.

Mr. John: rose—

Mr. Clarke: I shall return to the subject at more length, as it is an underlying theme—the effects of the Government's policy of reducing inflation on improving the NHS's financial position and that of the vulnerable in our society, including those who depend on national insurance benefits.
The Government's commitment to the social services has been demonstrated in the general drift of spending on social services throughout the past three years, despite the recession. People complain that we spend too low a proportion of the GDP on the Health Service. The proportion has risen substantially under this Government, from 4·8 per cent. when we took office, to 5·7 per cent. now. The same is true of all our programmes. In the entirety of the Department's programmes the proportion has risen from 15·7 per cent. to 19·2 per cent. As I go into the details I shall demonstrate why.
Against that background, as the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) said, the Labour Party has gone in for hyberbole and has chosen the extraordinary description "the dismantling of the Welfare State" to criticise a Government who have so dramatically increased spending and increased the priority that we give to the service. The nearest that the Labour Party has got to justifying its doomwatch description has been to raise the old spectre of the Think Tank report, which gave Labour Members such joy during its brief appearance in the newspapers in July. True to form, the hon. Members for Fife, Central (Mr. Hamilton), for Liverpool, Edge Hill (Mr. Alton) and for Crewe all tried to use the Think Tank leak to say that, despite the evidence of our commitment to the social services, we were secretly plotting to do away with the NHS.
Everyone in a position of authority in the Government has already answered the allegations. When the Prime Minister spoke at the party conference about the NHS being safe with us, she was speaking on behalf of the whole Government. Before the Think Tank report ever appeared, my right hon. Friend the Secretary of State for Social Services made it clear, in July, that the Government had no intention of changing the basis upon which the NHS would be financed. When the chairman of our party said that the report was a dead duck, again he was speaking on behalf of the party. It is an absurd irrelevance for the Opposition to go against the factual record of the Government's commitment to the NHS and to trail around a leak in The Economist as some kind of evidence, contrary to all that we have said, that we threaten the future existence of the NHS.

Mr. John: Like his mentor, the Minister has carefully avoided the other part of the Think Tank proposals—the de-indexation of pensions and raising them by less than the cost of living. Will he state categorically that the Government oppose that suggestion?

Mr. Clarke: Yes. We are in no way suggesting the de-indexing of long-term benefits. With this November uprating, the effect of the Government's underestimate of inflation will be that we have exceeded our election promise to inflation-proof pensions. Pensioners are about


to get an increase running ahead of the low rate of inflation that the Government have achieved. I shall return to that in a moment.
The hon. Member for Pontypridd bandied about figures to show that somehow we had not achieved the sort of growth that we ought. Let me compare growth in national health services under this Government with growth under the last Labour Government, of which the hon. Gentleman was a member. By using the phrase "growth in national health services", I use the convention used by both this Government and the previous one. I therefore use figures that take account of the fact that drug and other costs in the Health Service have been rising faster than the RPI. As my right hon. Friend said, since coming into office we have been 16 per cent. ahead of the RPI, but making allowances for rising NHS costs, I shall use the convention of growth in services.
In the last three years of the Labour Government, the increase in NHS spending was 4·3 per cent. That included a cut in capital spending of 23·5 per cent.—nearly a quarter. They slashed the Health Service capital programmes, and if they are waiting for new hospitals they are doing so because the last Government postponed them. We have not cut our capital programmes at all.
In our first three complete years, we achieved a total increase of 4·7 per cent. The hon. Member for Pontypridd said that the Labour Government had achieved a growth three times that of ours. In fact, their achievement was not quite as good as ours and included a great cut in capital programmes. He also alleged a cut of £142 million of which there is no evidence at all, and the hon. Gentleman knows it.

Mr. Frank Dobson: Will the Minister give way?

Mr. Clarke: I shall not. It is good to see the hon. Gentleman make a late appearance in the Chamber. He would have been useful earlier when only four Labour Back Benchers were present to bemoan the decline in the Welfare State.
Following the record of growth that we have achieved, the Chancellor's statement announces £80 million extra spending on the Health Service next year above the already published figure in the previous White Paper. That £80 million must be added to the 0·5 per cent. efficiency savings that we have agreed with the chairmen of regional health authorities can be achieved by bodies with such large budgets to see the measure of growth in the Service that we believe can be maintained.
I was asked how that £80 million would be divided. About £40 million will go into Health Service budgets which accounts for the knock-on of the Contingency Fund contribution to the pay offer. About £20 million will go into new policy initiatives, and about £15 million will go into increased demand for welfare milk. I say "about" because we must see what happens to pay and price movements over the next few months. I know that those figures do not add up to £80 million, but they will eventually. They are approximate. The £80 million is there. The divisions are approximate.

Mrs. Dunwoody: If the hon. and learned Gentleman is referring to £40 million, that sum will not even cover

the amount that the regional health authorities will have to pay for the increase next year. Is that another cut in the budget?

Mr. Clarke: The £40 million is the contribution that the regional health authorities are making to this year's improved pay offer, about which the hon. Lady was complaining. That payment will be repeated next year. The hon. Lady raised alarmist stories about some regions, partly based on the supposition that that £40 million knock-on figure would not be in next year's budget. Today we have announced that the figure is to be in next year's budget. Most importantly, not only are we making that contribution to Health Service budgets but we are reserving about £20 million for new policy initiatives of the kind that my right hon. Friend the Secretary of State announced and which deserve analysis, because the figure shows our commitment to the very pockets of deprivation and need identified by those hon. Members who expressed most anxiety about the Health Service.
The hon. Member for Newcastle upon Tyne, East mentioned the policy areas that he would like to see picked out, and a number of those pockets of deprivation were included in the Secretary of State's speech. Obviously, we shall give priority to getting mentally handicapped children out of hospital, improving primary care in inner cities and supporting work for the under-fives—the latter priority mentioned by the hon. Member for Eton and Slough (Miss Lestor). These are all matters for which we have reserved money to make real improvements this year as a result of the announcement made by my right hon. and learned Friend the Chancellor of the Exchequer today.
I return to the political battle. The Labour Party has compounded its complete misinterpretation of the Government's record and misrepresented all the Government's figures. The Opposition have claimed that somehow they could solve all the Government's problems by pouring yet more money into the Health Service, despite their failure to do so when in office.
The hon. Member for Crewe did not say what her vague account of 3 per cent. growth meant. If she is comparing 3 per cent. growth each year with the retail price index she is probably offering not much more than the Government have achieved—16 per cent., overall, during our period of office. Knowing the hon. Lady, I am sure that she will probably now double the figure if she finds that she has not increased it enough to exceed the Government's record. If she means 3 per cent. real growth and then in addition allows the kind of pay increases that some of her utterances of the past few months have implied that her party would allow to its allies in the trade unions, she is talking about astronomical sums that could not conceivably be found.
Some hon. and right hon. Members have expressed fears about their own regions. My right hon. Friend the Member for Chesham and Amersham and my hon. Friend the Member for Beaconsfield (Mr. Smith) discussed the document put out by the Oxford regional health authority. Officials of the Oxford RHA published the document and the document has only recently been discussed by the full authority. The Oxford RHA is being provided with funds to achieve a growth in services of 1·6 per cent. this year and we will soon give the authority a figure for next year as well.

Sir Ian Gilmour: rose—

Mr. Clarke: I hope that the remarks of my right hon. Friend the Member for Chesham and Amersham on the exchange rate were based on a more careful analysis of the documents that he received and that he has not been misled by the figures of the Oxford RHA that were the basis for the document published by its officials. Those figures were based on the assumption of forecasts of higher pay settlements than we shall concede. The figures also assumed that Oxford would pay for them. Development moneys that the Oxford RHA is holding back for improvements in services were treated as if they were a kind of cut, and after discussions I had with the chairman, the Oxford RHA has introduced a new document containing sensible figures that we are prepared to regard as the basis for discussion with the districts. However, the chairman told his authority, as he told me, that the first document with its more extreme suggestions is not to be used as the basis of any policies or proposals for action in the region.

Sir Ian Gilmour: In that case, will my hon. and learned Friend say why one of his officials, on his behalf, praised the original document? Secondly, will my hon. and learned Friend say what he intends to do to rectify the injustice that is perpetrated upon the Oxford area health authority by the fact that his Department takes no account of rises in population?

Mr. Clarke: The official used words very similar to my own, in saying that without the way-out suggestions the document deserved serious study. Some of the suggestions in it for rationalising services deserve serious study, because the authority will get better value out of the growth money that it is being offered.
Oxford, like every one of the other 14 regions, complains about the method of distribution of resources to the region. Every region in Britain regards the RAWP system as curiously working against its interests vis-á-vis the other 13. Oxford has the second highest rate of growth in Britain. We have made a minor alteration to RAWP so that Oxford has greater account given to its growing population this year than it has ever been given before.
With regard to the problems of the Merseyside region, it is simply not true that Merseyside is facing any sort of cut. The city of Liverpool, in that region, is now being consulted by the regional health authority about the possibility of cuts over a period of years because of the dramatic fall in the city's population as compared with the rest of the region. The hospitals concerned are obviously in some doubt at the moment. The views of the public, of the hospitals and of all those concerned are being taken into consideration.
If anyone says that Merseyside is not entitled to look at redistribution of resources within its region when Liverpool has lost so much population, he should take it up with the hon. Member for Warrington (Mr. Hoyle), who consistently represents to me that Warrington is most unfairly treated inside the Merseyside region vis-á-vis Liverpool, where the population has fallen.

Mr. Alton: Will the Minister give an undertaking to the House this evening that where there are waiting lists of elderly people for surgical wards in hospitals such as the Sefton general hospital in Liverpool, those facilities will not be closed down?

Mr. Clarke: The whole point of consultation is to identify patient needs and to produce a rational and, we

hope, acceptable policy for Liverpool which will reflect its declining population and release resources for growth in other parts of the Mersey region where the money is desperately needed.
I have left myself little time in which to deal with the personal social services. I should like to reflect some of the things that the hon. Member for Crewe has said, for within personal social services spending there are, indeed, the very areas of human need that she described. I disagree with her description of personal social services spending as having been slashed to pieces by the Government. It has gone up by 7 per cent. in real terms in our period of office. It is up by 2 per cent. in 1982–83.
In the allocations of money just announced by the Government for local authority spending, in the money that has been added to the grant-related expenditure assessment totals, the £230 million announced today, which is a higher figure than the indicative figures given in last year's White Paper, an extra £63 million is identified as being for the personal social services. That is over a quarter of the total that we have added, despite the fact that the social services at present are only one tenth of local authority expenditure.
To give an example of the cuts that we are supposed to be making, for next year our indicative figures represent a 2 per cent. increase in cash terms over 1982–83 budgets. It remains to be seen how much of the unallocated £700 million that local authorities can allocate to social services will be allocated. If we get it pro rata we can expect 3½ per cent. That means that if wages and prices move by, say, 4½ per cent. next year, we have made provision for real growth of 1 per cent. in personal social services.
I have not given myself time in which to go further in answering the kinds of allegations that were made by the hon. Member for Crewe and by the hon. Member for Eton and Slough, who made the most wide and sweeping suggestions that we were cutting back the personal social services. On the contrary, the background is one of increasing expenditure and possible further increases.
I was asked by a number of hon. Members, including the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), who told me that he would not be able to stay for my speech, and my hon. Friend the Member for Devon, West (Sir P. Mills) about proposals for transferring funds from the Health Service to local government when there are patients who would be better off out of hospital and receiving community care. That is the area identified as joint finance.
My right hon. Friend the Secretary of State explained earlier the new initiative with new cash that we are proposing to try to get more children out of mental handicap hospitals, but our announcements on joint finance also extend to adults, as the right hon. Member for Stoke-on-Trent, South demanded, and continue the process of putting more money into joint finance.
Joint finance has gone up by 35 per cent. under this Government and the Chancellor announced today an extra £6 million for our programmes. We have already announced that we are consulting on a relaxation of the rules on joint finance to make it more attractive to local authorities.
My hon. Friend the Member for Devon, West also asked us to look at the welcome growth in the provision of private nursing homes and private homes for the elderly


to make sure that standards are maintained. That task will be an important part of the Bill that was referred to in the Gracious Speech.
I dealt briefly with pensions and social security earlier and I explained the problem. The Government have kept to their election commitment to keep pensions and long-term benefits in line with prices. Because we have had more success than we expected in reducing inflation we find that this year's uprating will put pensioners and other beneficiaries ahead of inflation. We are, therefore, talking about whether pensioners and beneficiaries of all sorts should keep the full benefit of the overestimate or whether there should be adjustments when final decisions are made at the time of the Budget.

Mr. John: Will the Minister give way?

Mr. Clarke: No. I do not have time. There was no problem for the previous Government, who did not have the same success in reducing inflation.

Mr. Rooker: We had 20 per cent. growth.

Mr. Clarke: The 20 per cent. growth is entirely attributable—

Mr. Rooker: Deny it.

Mr. Clarke: I do not deny it. In the mid-1970s I held the same shadow post that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) holds. If he looks at the 20 per cent. growth of which he is so proud he will find that it was entirely attributable to the July 1974 uprating of pensions and benefits—the pre-election spending spree of the Labour Government before October 1974. After that date they merely kept pensions and benefits in line with inflation, except that in 1976 they fiddled the inflation-proofing by changing the basis on which benefit rates were increased. They altered the basis of the uprating from historic estimates to the forecasts which are now giving rise to problems. If anyone wants to know why the Labour Government did that he need only look at the memoirs of the right hon. Member for Heywood and Royton (Mr. Barnett), who was Chief Secretary to the Treasury at that time. He wrote:
Later I managed to obtain a change to fix the pension increase to be announced in April"—

Mr. John: Will the Minister give way?

Mr. Clarke: The hon. Member for Pontypridd does not want to hear this.

Mr. John: Will the Minister give way?

Mr. Speaker: Order. If the Minister does not give way he must be allowed to continue.

Mr. Clarke: The hon. Member for Pontypridd does not want to hear about the year in which the Government of which he was a member took £500 million from the pension uprating by the device of moving from the historic basis to the basis of forecast increases in inflation. The former Chief Secretary wrote:
The reason was simple. With inflation forecast to show a substantial fall, if we had not made such a change we would be increasing pensions and other benefits by nearly 30 per cent. when earnings and prices increases were already falling.
The Labour Government therefore made the change, but failed to reduce inflation. However, they saved £500 million which, at today's prices, would be worth £932 million.
We have made no decisions for this year. I ask the hon. Members for Pontypridd and for Crewe to stop trying to penetrate the figures. They are impenetrable because the decisions have not yet been taken. We do not know the extent of the overshoot, the forecast for inflation next year or the extent to which the Government will increase some benefits or adjust pensions and benefits because of the overshoot on inflation this year.
The time to take that decision will be next year's Budget. At that time, we shall be in the happy position of reviewing the whole area of pensions and benefits, looking perhaps at the 5 per cent. abatement, and perhaps adjustments for inflation for pensioners. We shall be making a judgment against the background of having put up benefit levels ahead of inflation despite all the strictures of the Opposition. The problem that we face is the problem of our success and exceeding our election promises. This gives the lie to the allegation that we are destroying the Welfare State. I do not know what the hon. Member for Pontypridd is waving at me. I hope he is not waving—
Debate adjourned.—[Mr. Lang].

Debate to be resumed tomorrow.

Orders of the Day — Palace School, Ely

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lang.]

10 pm

Mr. Clement Freud: There are people who claim to feel better after they have had their temperature taken. I should like to pay tribute to the therapeutic effects of having had details of my Adjournment debate published on the Order Paper. As a result, things are now better than when I tabled those details.
My motion calls attention to the future of the Palace school, in Ely. It is a school for severely handicapped secondary school children, predominantly those suffering from muscular dystrophy, cerebral palsy and spina bifida. They are not capable of being integrated. The school is housed in the old bishop's palace in Ely. It is the property of the Church Commissioners and has been leased for many years to the British Red Cross Society which administers it by a board of governors acting on behalf of the Cambridgeshire trustees. There is a peppercorn rent on a full repairing lease.
Money is recouped by the Red Cross from the local education authorities of many counties. The Red Cross would break even with an occupancy of about 45. The current school roll is 32, which looks like dropping to 22 in the autumn of next year. The staff consists of 21 full-time workers and 21 part-time workers. Virtually no savings can be made when occupancy is down. Some months ago the Red Cross Society announced that it would close the school at the end of the summer term next year, telling the staff that it had done its best to find more pupils but without avail. The society was delighted to see so great a decline in the numbers of severely physically handicapped people and was negotiating with the Department of Education and Science over a claim for repayment of funds. It was rumoured that the Department wanted a return of some of the money it had paid in respect of capital expenditure at the Palace.
The people of Ely, who have done much to help the Palace socially, financially and in every other way, were outraged. The parents of the 32 children, especially the 22 intending to stay to the end of their school days, were deeply perplexed. They had been given no news about what might happen to their children. The Minister will recall that I wrote to him and also to the Department of Health and Social Security. I received the following reply from the Minister:
As this is a non-maintained special school the decision on whether or not it should continue is a matter for the controlling body, in this case, the Cambridgeshire Branch of the British Red Cross Society. Closure does not require approval by the Secretary of State. We are, however, concerned about future placement of the pupils now at the school, and officials here have been in touch with the Managers expressing the hope that all reasonable steps will be taken to safeguard the future interests of these children. This brought a ready response that the Managers were offering the parents and the local education authorities what help they could to seek alternative places. I understand that the Managers have arranged a parents' meeting for 6 November at which local education authority representatives will also be present, when no doubt they will offer further help. I hope this will lead to real progress in finding alternative places for the 22 children.
I am not an hon. Member who fights for the retention of what there is regardless of merit. The Minister must accept that I realised the situation of "Who is responsible for what" and "Who can save what" as well as his advisers

who wrote the letter which I have read and he signed. What concerns me is that he or his advisers have missed the point. As Minister, he is responsible for local education authorities, which appear to have told the Cambridgeshire Red Cross that there were no children in need of the services that the Palace school provides. If the Minister will place his hand on his heart and tell me that there are, in the catchment area of the Palace school in Ely, which already has pupils from more than 100 miles away, no children suffering from muscular dystrophy, spina bifida, cerebal palsy or Cockayne's syndrome who would benefit from being boarders at the Palace school, I would be tempted to sit down. He cannot do so, so I shall not do so.
What has happened as a result, inter alia, of this debate is that the Red Cross has promised to try every local education authority again to find pupils, and to give a stay of execution until 23 January. By that time, if we can find 25 more children, the Red Cross will continue to administer the school. I shall send details of this debate to each LEA with an invitation to come to Ely and case the joint. I hope that the Minister will support that.
The Red Cross should have done this months, probably years, ago, but I accept that it has now done the right thing, and on behalf of the pupils I thank it. I do not understand how a charity that so many of us support and that has an income of £11 million a year should have to balance its books, but I shall let that pass.
The Palace shool has all the facilities that could be hoped for. It has purpose-rebuilt premises, a swimming pool, expert and dedicated staff, management, governors, physiotherapists, a psychologist, teachers, day attendants, night attendants, house mothers and a caring local community that needs only to be asked to provide.
I hope and trust that the 22 children, in respect of whom contingency plans are now being made to transfer them to Hampshire 150 miles away—probably five hours by car for an East Anglian parent wanting to visit, and rather further than that for those from Lincolnshire and Norfolk—will be able to stay put and be hosts to a new intake. I hope, too, that the staff, many of whom have been there for years, will be able to keep their jobs and will not have to receive the wholly inadequate redundancy payment that is theirs by right.
When I say "wholly inadequate", I mean it. The headmistress, aged 51 and unlikely to find another job, with seven years' service and a salary of £14,712 a year, has been offered £1,417 as a redundancy payment. The deputy head, with 14 years' service and a salary of £10,421 a year, is to receive £1,755.
There is another aspect of the case that I wish to bring to the attention of the Minister. The Prime Minister, in a number of answers to me in the International Year of Disabled People, told me that this Government had made better the lot of the disabled, and that Britons had every right to believe what she said. It would be a poor advertisement for the country, and for the Tory Party, if they had not.
My constituents believed her and continued to give most generously to the Palace school. The Ely Lions gave a video, and more. The Rotary paid for a parents' caravan, and more. The RAF equipped a classroom, and the Master Butchers' Association, the women's institutes, Ely Rotary and Burberry's of Littleport gave money and materials for the school. Virtually every local society and club, pub and hotel and many families in and around the city raised


money that went to the Palace school for the benefit of the pupils. That money did not go to the Palace school to enhance the value of the Church Commissioners' property. It went to help the disabled children for whom the Prime Minister said she had such sympathy and for whom her Government cared so much and would do so such a lot.
Had there been no intervention the school would have closed as quietly as the Red Cross could have managed and the children would have been dispersed to the great distress of their parents, causing them untold misery. I say "untold misery" because they are unable to tell us just how much they suffer.
How can people have faith in continuing to deny themselves and contribute to a local charity if the Government, despite their broad brush promises, will not stand up and fight? I do not call my concern about the future placement a fight. I do not think that my hope that this will lead to real progress in finding alternative places is a satisfactory response to tens of thousands of pounds of locally raised funds to equip a building which was to be sold to the private school up the road, thereby saving that school huge building costs and depriving my constituents of the much needed employment that that would have meant.
I am not looking for a detailed reply from the Minister. I shall be content if he signifies simply that he will do his best, as I shall do mine and the Red Cross shall do its, to find children in need so that the children of my constituents and of many other Members at the Palace school, who come from nine local education authorities, will be able to remain in the place which they regard as home and which they would be miserable to leave.
Action by the Minister in the next two months will also restore the faith of the people of Ely and the surrounding district who have every right to believe that the money that they have spent on maintaining the Palace school was well spent. Britain depends greatly on charitable contributions and voluntary involvement.
Closure of the Palace school will be a blow to the people who did so much and who worked so hard, and it would be a great deterrent to future benefactors on whom all sectors of society depend. I have letters from virtually every local authority, from local clubs and societies, and from local councillors supporting the retention of the facilities at the Palace school. I hope that the Minister will say that he will try to bring those facilities to the attention of the many local education authorities which look to him for guidance.

The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): I am grateful to the hon. Member for the Isle of Ely (Mr. Freud) for raising the matter of the Palace school. I share his appreciation of the valuable work done by the Palace school over the years for the education and care of physically handicapped pupils. I fully share his anxiety that the closure of the school should not adversely affect the continued education of the pupils if closure turns out to be necessary. On the other hand, one hopes that if local authorities are prepared to send children there, closure will not occur.
The problems of the school must be considered against the general background of what is happening to many other schools—special schools as well as ordinary schools. The

general decline in the birth rate has led to falling rolls in schools and additional factors have also affected special schools. It is as well to remind the House that over the past eight years school numbers have declined from 9 million to 7½ million.
Additional factors affecting special schools include changes in the nature and extent of handicap, progress in integrating handicapped children into ordinary schools—there was an Act in 1981 related to that aspect—and efforts by local education authorities to place handicapped children in schools near to their homes. I take the hon. Gentleman's point that in this case most of the children come from the nine counties to which he referred. Obviously it is better for the parents concerned and their families that the children are not at the other end of the country but can be reached easily. I hope that the hon. Gentleman will also agree that the reduction in the number of physically handicapped pupils who need boarding education in special schools is to be welcomed, although it may threaten the stability of some schools. There are 106 non-maintained special schools in Britain and I should be surprised if some of those schools were not affected seriously by falling numbers.

Mr. Freud: Does the Under-Secretary of State agree that there is not so much a reduction in the number of handicapped children as in the budgets of local education authorities to pay for those children?

Mr. Boyson: I do not have the figures here, but I shall write to the hon. Gentleman to tell him whether his statement is correct. If there is a fall of about 20 per cent. in the number of children, there must be a fall in the number of handicapped children. If, in addition, we are integrating more children into ordinary schools, there must be a further fall. We can check the demand, but I do not accept the hon. Gentleman's statement. The fall is due not to a cut in budget but to a change of policy on special schools—the hon. Gentleman agreed with the view of the Warnock committee—and to the falling rolls.
Those figures are at the root of the problem facing the schools. The school derives its income almost wholly from the fees that it charges to local education authorities. As the number of pupils falls, the cost per pupil increases. At present, the fees are £6,000 per annum and they will increase to £8,000 in January 1983. The fall in income will be serious. The school is approved for 50 boarding places for physically handicapped children aged 5 to 16 years and up to five day places. In 1980, the school had 54 children. In January 1982, it had 41 pupils and at present there are 32. By July of next year, if there were no alteration following the meeting last Saturday, the figure would have to be reduced to about 20 to 22. The managers have tried hard, but have failed until now to attract additional pupils.
Special education in a boarding school is expensive, because as well as the teaching staff many care staff and other paramedical staff are needed. But clearly there is a limit to the amount that it is reasonable to expect local education authorities to pay for such boarding education. I have referred to a school in Brent where, because of falling numbers, fees rose to about £38,000 to £40,000 a year. There must be a limit beyond which local authorities will not be prepared to go. The non-maintained special schools are caught in a nutcracker. If their rolls fall, they must increase their fees to cover their costs, whereupon the local authorities go elsewhere to schools that are fuller and where the fees are low.


The school is run by the Cambridgeshire branch of the British Red Cross Society. It has been suggested that the Red Cross should subsidise the school from its large revenue income. That is entirely for the Red Cross to decide, and it is not for the Government to influence it. This is the only special school run under its auspices and it is not primarily a body concerned with providing education.
Over the years, the Department has paid capital grant to the managers to help with the upkeep of the school buildings and to provide additional teaching accommodation. The school is housed in the former palace of the Bishops of Ely and is expensive to maintain. Since 1967, grant amounting to about £112,000 has been paid and is repayable when the school closes. The managers are aware of that liability. Such an arrangement is made when Government money is invested in non-maintained special schools.
The Department has no resources to assist in meeting any shortfall in the revenue expenses of non-maintained special schools. In any event, it would be wrong to use public funds to shore up a school where there seemed little prospect of it becoming financially sound. I am sure that the hon. Member—or at least his constituents—would be the first to complain if public money were wasted in that way.
Even if some financial arrangement could be made to keep the school open, we should be left with a school for about 20 pupils—unless alternative arrangements could be made.

Mr. Freud: On a point of order, Mr. Deputy Speaker. Could the Minister answer my questions instead of reading his brief?

Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. That is not a point of order. The Minister is responsible for his own speech.

Dr. Boyson: If the hon. Gentleman will listen carefully, he will find all the answers to his questions in my speech. As I want to give him additional information—perhaps the people at the school may like additional information—I ask him to listen carefully so that he can pass on the information.
If the school has only 20 pupils, it will not be financially viable. The pupils will be mainly of secondary school age, and it will be difficult to provide an adequate curriculum in terms of its breadth and specialist options. The year groups will be tiny. They will encompass an ability range wider than that normally found in a secondary school. In addition, these young people will be denied an essential element of the educative process in that there will be limited opportunity to develop a range of relationships with their peers. When ordinary schools are too small, it is impossible to have the proper spread of teaching. The same is true of special schools. To try to maintain a school unless it can increase its numbers well beyond 20, would be disadvantageous educationally just as it would be disadvantageous financially in maintaining it.
The hon. Gentleman appears to disagree. Perhaps he would care to intervene.

Mr. Freud: The Minister is giving an answer to a question that has not been asked. The problem is simple. Will he help to identify more children if they exist, will he restore the faith of my constituents who have worked

so hard to keep this school going, and will he make sure that, if there are no children, they are told, and that, if there are such children, they go there and their money remains well spent? That was the purpose of this Adjournment debate.

Dr. Boyson: I thought that the hon. Gentleman wanted information as well. I shall give the hon. Gentleman a direct answer. We are responsible for maintaining special schools in this country through the local authorities. As I said, there are 106 non-maintained special schools, and the Government would be remiss if they did not treat them all alike. If the only way to keep the school going were to denude other schools, that, in my view, would be completely wrong. As the hon. Gentleman forces me to give it to him straight, I shall certainly not give a pledge that we shall take action especially for this school, which we will not do for other special schools, to the detriment of those special schools. We are prepared to help where we can. The tradition of the Liberal Party was never to put all responsibility on the Government, but clearly the present Liberal Party has forgotten that. The local authorities, not the Government, send the children there. [Interruption.] The hon. Gentleman should listen. He has put straight questions to me, and I am replying to him.
The Government will not exercise pressure on local authorities against their wishes to send children to a school to which they do not wish to send them. The hon. Gentleman must accept that. There are other parts of the country, apart from the Isle of Ely, and there are other specialist groups. I have great respect for the staff and the headmistress there, but the hon. Gentleman should not expect the Government to act in one case and ignore the rest. If the hon. Gentleman will wait, I shall say what we are prepared to do, but to ask for special consideration that the other non-maintained special schools do not get is totally wrong and parochial and will not help the Liberal Party nationally.
For a maintained special school, the approval of the Secretary of State is required before it can be closed. This does not apply to non-maintained special schools such as the Palace school, so there is no direct Government responsibility there. But the managers have kept the Department informed of their proposals and have received advice from Her Majesty's inspectors and from officials.
We ought to pay tribute to the Red Cross Society, which did not get very much tribute from the right hon. Gentleman. Some of his constituents did, but the Red Cross did not. Tribute is owed to it for the fact that it gave a year's notice when it realised that huge sums of money, which in many cases presumably it wished to use for other purposes, would be needed to subsidise that school. It did not shut down the school immediately. It said that it would go to all lengths possible to ensure that the children there were sent to other non-maintained special schools for which they were suitable. I put on record the responsible way in which the Red Cross Society acted, and I am grateful for this opportunity to do so.
The managers had been concerned about the future of the school for some time, and they approached the Department early in 1981. They also contacted all the local education authorities and other bodies which might wish to send pupils to the school. But the results were disappointing. However, the hon. Gentleman should have paid tribute to the managers.


In July 1982, the managers notified the Department of their intention to close the school in July 1983. At the same time, the managers also gave formal notice of the proposed closure to the nine local education authorities with children at the school, to the parents and staff and to other interested parties. Although not obliged to do so, they thus followed the general procedures required for the closure of a special school maintained by a local education authority. I know that the managers took their decision after a good deal of consideration and with a great deal of regret. I think that they acted responsibly in giving a whole year's notice of the proposed closure.
On Friday and Saturday of last week, the managers held meetings at the school with the staff and parents and representatives of the local education authorities concerned. I understand that the managers explained fully the financial plight of the school. They said that they were willing to reconsider keeping the school open if sufficient pupils of the right sort could be found on a long-term basis. It strikes me that that is a perfectly responsible attitude to take. Further meetings are being arranged to consider this again. On 16 December, the managers are to meet local education authorities, medical officers and social workers to see what prospects there are of more pupils becoming available. On 22 January, the managers are to meet the parents again. I understand that the managers have agreed to defer final action on the disposal of the lease for the school buildings until after that meeting.
It is clear, therefore, that there is a chance that the Palace school will remain open. As I have explained, the final decision must rest with the managers. It is not the

responsibility of the Government. If the school closes, the responsibility for finding suitable alternative schools for the pupils lies with the local education authorities concerned. Equally, it is for the local education authorities to determine whether they can support the school by being able to send pupils in future. If there are particular difficulties in some cases, I know—and I give this pledge—that Her Majesty's inspectorate and officials of the Department will be glad to advise the managers and the local education authorities.
I say to the hon. Gentleman in a completely straightforward manner that I know that it would be a tragedy for the people in his area, who have helped in the maintenance of that school, and for the Red Cross, which has run the school with a high record of achievement over many years, if the school were closed. But its continuance must now depend on whether a sufficient number of local authorities will send enough children there. I share the hon. Gentleman's hope that they will, but that is a decision which only they can make. They must decide whether to send children there without putting at risk any of their own special schools in their areas.
What happened last Friday and Saturday at those meetings with the managers is good, as is the contact with local authorities and, presumably, with people in the area. I hope that circumstances will arise which allow for the school to continue, but that must rest entirely with the local education authorities and the ruling body of the Palace school, the Red Cross.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o' clock.